The passenger was acting aggressively and was handcuffed by the crew.
Initially, the Indonesian Air Force said the Boeing 737 from Brisbane was believed to have been hijacked.
The Australian passenger began pounding on the cockpit door before he was handcuffed by the crew, Virgin Australia airport manager Heru Sudjatmiko told Metro TV.
"There was no hijacking at all," he said. "It was only a miscommunication."
The passenger was arrested for creating a disturbance, he said.
The Boeing 737 was carrying more than 130 people on the flight to Bali, which is a leading tourist destination for Australians.
"The aircraft landed safely and at no point was the safety of passengers in question," an airline spokeswoman said in Australia.