News Limited reported that he was allegedly caught on Tuesday with 6.9 grams gross of marijuana or 3.6 grams net.
The schoolboy, from the state of NSW, is now being held at police headquarters in Denpasar, AAP reports.
The maximum jail term for anyone convicted of a possession charge is 12 years' jail.
Even more concerning is that there is no juvenile justice system in Indonesia so he could be placed in an adult prison though he could also be placed into his parents' custody.
He is the youngest Australian to be arrested in Indonesia under its harsh anti-drug laws which allow for the death penalty for trafficking.
The Department of Foreign Affairs and Trade has said he has not been charged, ABC reports.
The Herald Sun reported that it was alleged that the boy bought the marijuana when he was on his way to get a massage in Kuta and that he has told police during interrogations that the dealer approached him, saying that he hadn’t eaten for a day and needed money.
It is understood he said he paid 250,000 Rupiah for the marijuana or about $25, the Herald Sun reports.
After he had finished at his massage, it is understood the boy was then arrested by police on Tuesday afternoon.
He has been visited in the jail cells by Australian Consular officials in Bali.
His parents are in Bali with him and they are seeking the advice of a high profile lawyer who has previously handled cases for other Australians on drug charges in Bali.
DFAT says Foreign Minister Kevin Rudd has directed Australian officials to make the boy's release their top priority.