A 47-year-old Australian man has been arrested by Thai police and faces charges of assault and arson after clashing with the manager of a motorbike rental company in southern Thailand.

Kent Wesley Farrar, from Victoria, was detained on Friday after becoming allegedly angered by the bike’s excessive use of fuel after renting the bike for a week on the resort island of Koh Chang, and demanded a refund.

But the manager, Narong Borploy, 55, said Farrar turned down the offer of another bike and started fighting after being refused the repayment.

Farrar, who sustained head injuries in the clash, then allegedly grabbed a fuel canister and poured petrol over three rental bikes and set them ablaze.

Thai police said Farrar then grabbed a knife and began threatening passers-by before being subdued at the scene.

Farrar faces charges of arson and assault and a damage bill of 100,000 baht (A$3500).

Thai Police investigator on the case, Police Captain Banjerd Krachangsaeng, was unavailable for comment when contacted by AAP.

Farrar’s arrest comes in the lead up to the peak holiday season in Thailand and an influx of Australians over the Christmas period. Up to one million Australians visit Thailand each year.

Australian travellers are regularly warned over renting motorbikes in Thailand, often associated with scams by operators to extract additional fees for unspecified damages allegedly caused during the rental period.

A Department of Foreign Affairs spokesperson said the department was aware of Farrar’s arrest and consular staff were seeking to meet with him and provide assistance.