Sevdet Ramadan Besim, 19, was committed to trial on Thursday after pleading not guilty to four terror charges.
He is accused of plotting to run down and behead a police officer in Melbourne on Anzac Day.
Mr Besim was one of five teens arrested in police raids in April last year.
Prosecutors alleged on Thursday that he was communicating with a teenager overseas about a planned attack.
"I'd love to take out some cops," Mr Besim allegedly wrote.
He faces charges relating to searching internet sites, engaging in communications and creating a memo with the intention of planning a terrorist attack.
A fifth charge of conspiring to do an act in preparation or planning a terror act, which carries a life sentence, was withdrawn.
The Australian Broadcasting Corp quoted a document presented by prosecutors that summarised the alleged conversation about the kangaroo bomb.
"The conversation continues with BESIM detailing what he did that day and they have a general discussion around animals and wildlife in Australia including a suggestion that a kangaroo could be packed with C4 explosive, painted with the IS symbol and set loose on police officers," the document reportedly said.
Anzac Day, held on 25 April each year, commemorates Australian and New Zealand personnel killed in conflicts.
Mr Besim allegedly conducted internet searches on Anzac Day in preparation for a terrorist attack.
An Australian teenager allegedly discussed packing a kangaroo with explosives, painting it with an Islamic State symbol and setting it on police, a Melbourne court has heard.