When the unarmed man raised his phone to take a photo of what was unfolding, the would-be William Tell allegedly fired the arrow, which pierced through the phone screen.
He caught sight of a neighbour aiming a bow and arrow at him.
The police statement did not identify the model of the phone.
NSW Police said the confrontation happened on Wednesday when the 43-year-old man got out of his vehicle in the driveway of his home in Nimbin, in the north of the state.
Police say the victim was taking a photo of the man, who is known to him, when he fired the ranged weapon, hitting the phone. The reports further suggest that the arrow struck the iPhone, with the arrowhead partly passing through the device.
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The investigation comes as Facebook continues to struggle with the fallout from the Cambridge Analytica data-sharing scandal. Federal prosecutors are investigating data-sharing deals struck between Facebook and makers of mobile computing devices.
A 43-year old man from Australia narrowly missed being hit by an arrow, after the object ended up being lodged in his phone on Wednesday.
A 39-year-old man was charged with "armed with intent to commit an indictable offence, assault occasioning actual bodily harm and malicious damage", police said.
Police were called and officers from Richmond Police District arrested a 39-year-old man.
The alleged attacker is now out on bail and is set to appear in court in April.