Police identified the victim as Zivan Radmanovic, 32, from Melbourne and the injured man as Sanar Ghanim, 34, also from Melbourne, who was seriously wounded and taken to intensive care at Sanglah Hospital in Denpasar.
Local police chief Arief Batubara said the shooting took place at Villa Casa Santisya near Munggu Beach in the district of Badung.
Batubara confirmed Radmanovic died at the scene.
According to police, the villa had only three rooms occupied with a total of five guests when the shooting happened. The two victims' wives were also there and another foreign tourist, he said.
Radmanovic was shot in a bathroom, where police found 17 bullet casings and two intact bullets.
At least three witnesses at the villa told investigators that two gunmen, one wearing orange jacket with a dark helmet and another wearing a dark green jacket, a black mask and a dark helmet, arrived on a scooter at the villa around midnight.
Radmanovic's wife, Gourdeas Jazmyn, 30, told police that she suddenly woke up when she heard her husband screaming.Â
She cowered under a blanket when she heard multiple gunshots.
Jazmyn later found her husband's body and the injured Ghanim, whose wife has also testified to seeing the attackers.
A police spokesman Ariasandy said a witness said the pair were heard speaking English with an Australian accent.
The Australian Consulate in Bali has been contacted by authorities and an autopsy for further investigation is still waiting permission from the family of the victim, Batubara said.
The Department of Foreign Affairs and Trade said it was providing consular assistance to the family of the victim.
"We send our deepest condolences to the family at this difficult time," a spokesperson said.
"DFAT stands ready to provide consular assistance to another Australian injured in the same incident."
with AAP and Reuters
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