Corey Wood, 21, appeared in Warrnambool County Court on Friday where he made a bail application.

Crown prosecutor Craig McConaghy said Mr Wood was initially bailed on October 15 last year over a number of assaults to his brother in the family home between October 3 and October 8.

He said Mr Wood believed his brother and dog were conspiring against him and the "voices in his head were telling him to do it (the assaults)".

Mr Wood was bailed with conditions, including he seek mental health treatment and not attend the family home.

Lawyer Julia Munster said when Mr Wood attended South West Healthcare for a mental health assessment, he was asked to return the following day.

"From there, he went directly to his home to collect his identification and wallet and it was there where the very serious incident unfolded," she said.

The prosecutor said Mr Wood jumped over a fence and entered the back yard of the family home about 5pm.

He allegedly stabbed his brother twice in the chest with a 40-centimetre long knife before grabbing the family dog by the throat.

Mr Wood's parents were able to disarm the accused, who eventually fled the property. He was subsequently arrested after police later located him in the backyard of a nearby property.

The court heard the victim was airlifted to a Melbourne hospital with a single two-centimetre wound to his upper abdomen. He has since recovered.

The court heard two conflicting forensic psychological reports revealed that, at the time of the offending, Mr Wood was suffering from either a drug psychosis or an enduring mental illness.

Ms Munster said there was no dispute the offending was very serious.

But she said her client's parents were in court and were supportive of him being bailed in Warrnambool.

Ms Munster said her client was a young person who had spent 11 months in custody on remand.

She said if released on bail, Mr Wood would undergo a residential rehabilitation program, specialised mental health treatment, drug and alcohol programs and ongoing monitoring.

Judge Michael O'Connell said the accused had shown compelling reasons why he should be released from custody and bailed him with stringent conditions.

South West Healthcare's executive director of mental health services Karyn Cook said the service was "not prepared to comment on individual cases, including those before the courts, to ensure due process, privacy and dignity is protected".

"South West Healthcare operates 24 hour mental health access service across south-west region for urgent assessments and crisis presentations of existing and new consumers," she said.

"We are confident that all consumers who present to, or are referred to our mental health services are provided a comprehensive assessment, which result in planning for next steps for these individual consumers and their support networks.

"Not all presentations result in requirement of patient admissions."

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