Immigration Minister Kevin Andrews said Mohamed Haneef's work visa was canceled because he "failed the character test," and that he will be taken into immigration custody while his case is heard.
"I reasonably suspect that he has, or has had, an association with persons engaged in criminal activity, namely terrorism, in the U.K.," Andrews told reporters in Canberra, the national capital. "That's the basis on which I have made this decision."
The announcement prompted an immediate outcry from civil libertarians and Haneef's supporters, who claimed the government was subverting the justice process and wanted to keep him behind bars no matter what.
Earlier Monday, Queensland state Magistrate Jacqui Payne granted Haneef 10,000 Australian dollars bail (US$8,700) on a charge of providing support for a terrorist organization, saying there was no clear evidence he was involved in the car bomb plots in London and Scotland.
But Andrews said once Haneef's bail processing was complete, immigration officials would step in and bring him to a detention facility in Sydney.
Haneef's lawyer Peter Russo said he would appeal the government's decision.
"We will start the next battle. If that's the way they want to do it — bring it on," he told reporters outside the Brisbane jailhouse where Haneef has been held for two weeks.
Critics said Andrews' decision — and it's timing — appeared to challenge the court's authority.
"The reason we have an independent court system is so these incredibly important decisions are made for the right reasons, and aren't subject to political interference," said Cameron Murphy of the Australian Council for Civil Liberties. "It is not appropriate for the government to just keep him incarcerated because they don't like the decision of the magistrates court."
Police, acting on information from British investigators in the attack plot, arrested Haneef on July 2 as he tried to board a flight with a one-way ticket from the eastern city of Brisbane to India.
Police say he told them he was leaving to join his wife in Bangalore who had just given birth.
In Bangalore, Haneef's wife, Firdaus Arshiya, said canceling his visa was unfair.
"I think they are harassing my husband by doing this, because my husband is innocent," she told reporters. "If they had to cancel his visa why didn't they do it the day they charged him? Somehow they want to detain my husband."
Haneef, 27, was charged Saturday with providing support to a terrorist organization by giving his mobile phone SIM card to British suspects Sabeel and Kafeel Ahmed in July 2006, before he moved to Australia.
Haneef is a distant cousin of two brothers being detained in Britain, Sabeel and Kafeel Ahmed, and he shared a house with them in Liverpool before moving to Australia for a job at a hospital on Queensland state's Gold Coast.
Sabeel Ahmed was scheduled to appear in a London court Monday. He is accused of withholding information for authorities in the case. Ahmed is the third person to be charged in connection with the alleged plot in London and Glasgow.
Kafeel, is believed to have set himself on fire after crashing into the airport and is in a Scottish hospital with critical burns.
Prosecutors said the SIM card was found inside the burned-out vehicle used to attack the airport in Glasgow on June 30, and have described Haneef's support for the plot as "reckless" rather than deliberate.
Haneef's lawyers say the government's case is weak, and that he only left the SIM card so his cousins could take advantage of a special deal on his mobile phone plan.
Payne granted Haneef bail on the condition he pay the bond, reports to police three times a week, and stays away from any international ports.
She said prosecutors had not disclosed a clear link between Haneef and a terrorist organization, and noted there was no specific allegation that the SIM card had been used in the attack.
On Saturday, a British judge gave police until July 21 to continue questioning a Jordanian doctor, Mohammed Asha, 26, who was detained on a northern England highway on June 30. He was detained with his wife, who was released Thursday without charge.