Officers from Sutherland Shire Police Area Command attended and arrested the man, who was later charged with intentionally sexually touch child under 10 years, and intentionally sexually touch child between 10 and 16 years.
The Cronulla local was granted conditional bail and he is now due to appear at Sutherland Local Court on February 7, 2019.
At a media conference held at Cronulla Police Station this afternoon, Chief Inspector Gary Ford was full of praise for the good Samaritan who reported the assault.
"She saw the man close by putting his hands on the children in the surf and formed the opinion he wasn't a family member and that it was unacceptable," The Daily Telegraph reported Insp Ford as saying.
"She did a great job by notifying the lifeguards."
Insp Ford also warned parents to be vigilant at beaches over the busy summer holiday period.
"If you have children at the beach water safety is very important, but it is also very important to know where your children are at any time," he said.
Relatives of both girls were nearby but did not witness the alleged incident.
While Insp Ford said the alleged assault was "unusual", it is the second incident involving alleged sexual offences at Cronulla beaches in recent weeks.
In late November, a 31-year-old man was also charged with two counts of indecent assault and one count of common assault at a different, neighbouring beach.
Those charges related to a string of alleged assaults on three women which took place at Salmon Haul between October 30 and November 20.
"People need to be aware this should not be occurring in the area," Insp Ford said.
"We all need to be responsible for our actions."
