Police found the MP40 submachine gun, a prohibited firearm, after they pulled over a car yesterday in New South Wales state.
The weapon was developed in Nazi Germany and used extensively in World War II.
Police seized a bag containing the gun, a magazine and 60 rounds of ammunition. The gun's barrel was missing, the abc.Net.Au reported.
The man police charged was a passenger in the vehicle, which was stopped on Oakland Avenue.
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Shane Casey, senior curator at the Australian War Memorial, said the weapon was used extensively by the German army.
"It's a very robust weapon and was also souvenired during the war by Allied soldiers," he said.
"We've got examples here in our collection. You would find it after the war being used in Northern Ireland and there's also examples that have turned up in Vietnam and Cambodia," Casey said.
"Initially it would have been designed to be carried by troops in vehicles or paratroopers because it's quite small and has a folding stock," he said.
The man will appear in Wyong Local Court.
Australia has very strict gun control laws. All firearms must be registered, and to use one a person must hold a licence.
Last week, Australia brought in a national gun amnesty because of the growing terrorism threat and an influx of illegal arms in the country.
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