An Australian MP has been arrested at his electorate office over allegations of fraud.

Members of the NSW fraud squad executed an arrest warrant for Craig Thomson on behalf of the Victorian Fraud and Extortion Squad.

Victorian detectives flew to Sydney this morning where they accompanied police to Thomson's Central Coast electorate office.

Police have spent almost 18 months investigating claims that Thomson improperly used Health Services Union funds to spend on prostitutes, air travel, entertainment and cash withdrawals in excess of A$100,000.

In October last year police raided Thomson's home as well as his office.

They took away large boxes of material.

Thomson was national secretary of the HSU from 2002 until 2007 when he was elected to Parliament. Earlier last year he was suspended from the Australian Labor Party and has been sitting as an independent in Parliament since that time.

Thomson was charged by virtue of the arrest warrant with a fraud offence.

A further 149 fraud charges were expected to be laid against the 48-year-old when he appears in court.

In a statement, police said detectives were expected to apply for Thomson's extradition to Victoria.

Thomson, who has continued to maintain his innocence, was expected to apply for bail. He was also facing civil proceedings in the Federal Court of Australia relating to allegations that he improperly used union funds for his own benefit.

- Sydney Morning Herald