Australians are fighting in Iraq with the al-Qaeda splinter group whose lightning offensive over the past week threatens to tear the fragile country apart.
Security sources say individuals who left Australia to fight in Syria against the regime of Bashar al-Assad are definitely among extremist fighters sweeping across the border into neighbouring Iraq.
Authorities are deeply concerned that such fighters may pose a significant terrorism threat when they return to Australia. The revelations raise the chilling prospect that Australians might even have been involved in carrying out mass executions of surrendered Iraqi soldiers, pictures of which have been posted online by the jihadists as propaganda tools.
It is understood at least several Australians have crossed into Iraq and have been involved in the bloody fighting concentrated around the north of the country.
The group, the Islamic State of Iraq and the Levant, has sent shockwaves around Western capitals in the past week by chasing away much larger forces of Iraqi soldiers and seizing swathes of territory including Mosul, the country's second largest city.
The Australian Security Intelligence Organisation has previously said it is investigating about 120 to 150 people who have either travelled to Syria to fight or support the extremist rebels from Australia, including some who have been to Syria and come back again.
About half of those - or 60 individuals - are believed to be in Syria or the surrounding region. A considerable proportion of those are believed to be with the more extreme rebel groups including ISIL and al-Qaeda affiliate the al-Nusra Front.
At least some of those involved with ISIL are more than just foot soldiers, with some believed to hold more senior positions possibly as commanders, security sources say.
Both ASIO and Attorney-General George Brandis have repeatedly expressed concerns that such people will pose a terrorism threat when they return home battle-hardened and more radicalised. At least 10 Australians are believed to have been killed fighting in Syria with rebel groups.
Security officials are also understood to be concerned that ISIL's recent successes against Iraqi forces could be a rallying point and drive further recruitment, including in Australia.
There is also a danger that those returning will come back with what a source called ''jihadi street cred'' that could serve as a further recruiting magnet to others.
Senator Brandis said: ''Australians travelling to Iraq or Syria to engage in, or support, terrorist activities are not only committing criminal offences, but may face personal risks such as being kidnapped, seriously injured or killed.''
He said it was illegal for any Australian, including dual citizens, to ''fight, provide funding, provide training, or supply weapons to the conflict in Syria or Iraq''.
Most of the fighters are believed to be Lebanese or Turkish dual nationals.
Labor's foreign affairs spokeswoman Tanya Plibersek said on Thursday that Australians returning from fighting in Iraq and Syria was a ''very serious risk'', also pointing to the development of ''street cred'' that could allow returning fighters to ''convince other impressionable young people that going to fight is a good idea''.
Andrew Zammit, a researcher at the global terrorism research centre at Monash University, said he had expected Australians would end up in Iraq, given their considerable numbers in Syria, but said it was nonetheless worrying.
''It demonstrates that some of the Australians who joined the Syrian conflict have gone beyond simply wanting to fight the Assad regime, and have very much bought into the broader ambitions and world view of ISIL,'' he said.
''ISIL is a very violent and competent organisation, so there are well-founded fears that some of the Australians fighting with them may return with deadly skills, connections and intentions.''
He said recent murders at a Jewish museum in Brussels, Belgium, allegedly by a man who had fought with ISIL, were an example ''that Australian authorities would be concerned could happen here''.
In some cases, the Foreign Minister has cancelled the passports of Australians whom ASIO suspected were poised to travel to Syria to take up weapons.
But amid concerns this takes too long and could allow people to board planes before the cancellation can take effect, a report tabled in Parliament on Wednesday urges the government to allow ASIO to go straight to the Immigration Department to suspend a person's passport.
The report by the Independent National Security Legislation Monitor, Bret Walker, says passports could be cancelled for up to seven days while investigations are carried out.
Asked whether the passports of those who have gone to fight should be revoked, Ms Plibersek on Thursday said care should be taken when considering such a serious measure.
''But it is important that we take this seriously as a threat and the government is doing that,'' she said, adding that Labor would consider any other measures the government proposed to deal with the issue.
Meanwhile, Foreign Minister Julie Bishop has announced Australia will give $5 million in aid to help agencies in Iraq cope with a mounting humanitarian crisis.
Ms Plibersek on Thursday welcomed the announcement of aid, but said it was a ''drop in the bucket'' given the displacement of one million people.
''I am disappointed about the relatively small amount of aid provided to Syria and I hope that the aid is increased in both cases,'' Ms Plibersek told ABC radio.