It is one of the dragon-headed caterpillars (subfamily Charaxinae, Family Nymphalidae), and probably Charaxes sempronius the Tailed Emperor. See for example, http://lepidoptera.butterflyhouse.com.au/nymp/sempronius.html and https://www.australiangeographic.com.au/blogs/creatura-blog/2014/01/dragonhead-caterpillar/ . But please don't let that stop you from raising it with the kids to watch it pupate and emerge. That would be really cool!
Great record! Yes, it is a Tailed Emperor. If you do collect the caterpillar to raise, make sure you include the silken pad it will have made for a day bed, I think this is what you can see in the photo here across several of the leaves. They usually rest on this during the day and then feed at night. Stuart Rae has written a series of wonderful posts on this species in Canberra you might find interesting, see http://stuartrae.blogspot.com/search/label/Tailed%20Emperor
Thanks for the wonderful comments, which I have shared with the children. We didn't collect it as we have been encouraging the children to look at the find and return it to the wild. But next time, we will take your advice and raise it. we do raise silk worms, so I suppose its fairly similar idea. Didn't realise it was so rare. Libby