An Illawarra father encouraged his three-year-old son to commit a sexual act on a family friend, a court has heard.
The man, who cannot be named so as to protect the identity of his two children, allegedly told the young boy, while he was wearing no pants or underwear, to act in sexual way towards the female friend.
The woman objected, allegedly saying to the man "don't tell him to do that". However she told police the boy tried to do it, prompting the man to laugh and say "good boy".
The woman claimed she saw the man act sexually towards both his children on other occasions during the past month.
It is alleged on one occasion he simulated a sex act on his son, while on another occasion, he told the woman to rub his 18-month-old daughter's genital area while changing her pyjamas because "she liked it".
When the woman protested, the man allegedly told her he had performed sexual acts on the child on previous occasions and she "loved it".
The man was interviewed by Wollongong's child abuse squad before being charged on Friday with a single count of inciting a victim under the age of 10 to commit an indecent act.
The man sought release on bail in Wollongong Local Court on Saturday, telling Registrar Kathy Frost the whole incident was meant to be a lighthearted joke.
"The accused, in suggesting the conduct of the child, thought it was a joke," his lawyer told the court, adding his client had a low IQ and suffered from attention deficit disorder.
"It was in this context that he thought it was a joke. He's never sexually assaulted a child."
The court heard both children had been removed from the family's Albion Park Rail home by child welfare workers.
The man's lawyer, in arguing for his client to be released on bail, said he had the support of his wife and there was no suggestion he had ever approached other children in the past.
However the lawyer acting for the police, Michael Knight, described the man's behaviour as "disturbing" and said the court ultimately needed to consider the protection of the alleged victims and the community.
Ms Frost denied the man bail and adjourned the matter to Wednesday.