The defamation suit brought by former intelligence minister Ronnie Kasrils against deputy defence mi.
Austrian Police said on Thursday that the 80-year-old man repeatedly raped the women between 1970 and May 2011.
The alleged victims are now 53 and 45 years old.
They escaped when he tried to rape the elder daughter and she fought back. He fell to the ground, could not seek help and was found two days later by a social worker and taken to hospital.
He is now reported to be in the hospital of an elderly care home.
In the four decades prior to this, according to police, he is alleged to have kept the women locked in a small kitchen with only a wooden bench as a bed.
“The accused repeatedly threatened to kill them and threatened them with weapons,” the police department of the province of Upper Austria said in a statement.
The man banned his daughters from having “any social contact”, the statement added.
The allegations evoke the case of Austrian Josef Fritzl, who imprisoned his daughter in a windowless cellar for 24 years and repeatedly raped her. Fritzl fathered seven children with her, before being arrested and imprisoned for life in 2009.