Indonesian police killed five terror suspects and foiled a plot to attack tourists on holiday in Bali during the local New Year celebrations this week.

The La Vida Loca bar, popular with backpacking Aussies, was a target of the terror cell, according to the police. reported that police sources said attacks were planned for Thursday night, the eve of the annual Nyepi – or day of silence – to mark the Balinese Hindu new year.

Anti-terrorist unit Detachment 88 gunned down three men in Denpasar, including a suspected terrorist known as Hn, who has been on a police wanted list for the past two years.

Another two suspects were killed by police in Sanur, a popular tourist spot, close to the Cat and Fiddle pub.

A Bali police spokesman said: “On Danau Poso three people were killed from police fire and on Gunung Soputan two were shot dead. They are linked to terrorism.”

However, the police would not confirm whether explosives were found at these locations. reported that a senior police officer, who did not wish to be named, suggested the group had been planning to carry out terror attacks on Thursday, when pre-Nyepi parades attract big crowds.

The incident comes ahead of the 10th anniversary of the 2002 Bali bombings, which claimed the lives of 88 Australians.

Picture: Getty