A Byron Bay family is receiving federal government assistance, after their young daughter was allegedly sexually assaulted in Bali.

Indonesian police have arrested a 33-year-old local man, who was a driver at the Kuta resort where the family was staying.

News.com.au reports that the man is accused of snatching the nine-year-old from her bedroom where she was asleep before carrying her to a garden and removing her clothing.

Local officials say the girl began screaming for help after waking up, with the suspect panicking and racing back to his room where security guards found him pretending to be asleep.

The suspect's clothing, as well as the young girl's pyjamas, have been seized for forensic testing.

Investigations are ongoing.