Despite steadfast vows from the government in recent days to do everything possible to keep these fighters out of Australia, the latest revelation means they cannot be stripped of their Australian citizenship and must be allowed to return.

Immigration Minister Scott Morrison told the Coalition party-room meeting on Tuesday that most of the roughly 150 people alleged to be involved with extremist groups were believed to be Australian citizens only.

The admission appears to contradict a feisty declaration by the Prime Minister to the meeting that ''the government that stopped the boats will stop the jihadists''.

Revoking citizenship would leave these people stateless, which is regarded as legally and diplomatically impossible.

The Independent National Security Legislation Monitor, Bret Walker, urged the government in a report last week to consider revoking citizenship of such people but stressed only if ''to do so would not render them stateless'' - meaning it could only apply to dual citizens.

Foreign Affairs Minister Julie Bishop told the meeting the deteriorating security situation in Iraq and Syria was arguably ''the greatest threat to our domestic security that we have faced in some time''.

Meanwhile, Ms Bishop confirmed the government was considering as part of a raft of new counter-terrorism laws, giving the foreign intelligence agency extra powers to track Australians overseas.

This would allow the Australian Secret Intelligence Service to more easily gather intelligence on Australians abroad, a power it now has only in exceptional circumstances.

''We are looking at giving ASIS the capacity to carry out activities on Australians in Syria and Iraq,'' Ms Bishop told the ABC.

She also said she wanted to improve communication between intelligence agencies to prevent potential terrorists falling through the cracks.

''We're concerned about … intelligence communities not being able to cross-refer information,'' she said. ''We want to make sure that there's a seamless flow of information across our intelligence community, so that we can monitor and track and, if necessary, arrest, detain and prosecute people who are engaging in terrorist organisation.''

The government's mixed messages over revoking citizenship reflect the legal limitations it faces in meeting the expectations it has raised in tackling the threat posed by returning jihadists.

Mr Abbott told his colleagues on Tuesday the government would not demonise any particular group in the community, but community safety was paramount, and ''we will not let our country down in rising to this latest national security challenge''.

''We should never do anything to sully our reputation as a beacon of hope and freedom to people across the world,'' Mr Abbott said.

On Tuesday night, Mr Abbott told Sky News that while there was a case for cancelling passports and citizenship, it should not be regarded the sole measure to deal with the problem.

''What we need to do is take appropriate steps to protect our security, to enhance our intelligence and I suppose to reach out intelligently, sensitively and compassionately to all elements of the Australian family to try to ensure that no one in this country of ours feels like second class citizen purely on the basis of race, of ethnicity, of culture or religion,'' he said.

''I certainly think it would be helpful if there were more senior leaders of the Islamic community in Australia, more senior leaders of religious communities generally speaking out in favour of the sort of decency and fair mindedness which has always been a hallmark of our society and which frankly is why so many people from the four corners of the earth want to come here and live here.''