Bali police have arrested two people over a shooting which killed one Australian and seriously injured another.

Zivan Radmanovic, 32, was shot dead just after midnight on Saturday after two men broke into his villa in Munggu, in the south of the Indonesian tourist island.

One of the suspects was arrested in Jakarta, Indonesia's capital, while the other was caught abroad, police said without giving more details.

Mr Radmanovic's wife earlier told police she was awakened by her husband's screams before finding his body in the bathroom, Australian media reported.

Sanar Ghanim, who was also shot, is getting treatment for his injuries in hospital. Local police say the 34-year-old was also beaten.