The allegations first aired by local network Nine asserted that a suspected Chinese espionage ring approached a Chinese-Australian man to run as an MP, a BBC report said.
"Austral can be reassured that Asio was previously aware of matters that have been reported today, and has been actively investigating them," Asio director-general Mike Burgess said in a statement, and added "Hostile foreign intelligence activity continues to pose a real threat to our nation and its security."
The Australian government has said it is taking the allegations seriously, following a rare public statement from the nation's domestic spy agency.
China is yet to respond to the claims.
On Sunday, Nine's 60 Minutes programme reported that suspected Chinese agents approached a luxury car dealer, Nick Zhao, ahead of Australia's general election which took place in May.
They allegedly offered him $680,000 to fund his run for a Melbourne seat as a candidate for the ruling Liberal Party, of which Zhao was already a member.
Zhao gave information about the alleged approach to the Australian Security Intelligence Organisation (Asio) in 2018, Nine reported. "I'm in Australia but I feel censored by Chinese students," he said before being found dead in a hotel room in Melbourne in March.
It was his death that prompted the inquiry.
( With inputs from IANS )