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So far, Australian aircraft have been limited to humanitarian aid and delivering arms to Iraqi government-backed forces.

Australia is on high alert for attacks by radicalized Muslims or by home-grown militants returning from fighting in the Middle East, having raised its threat level to high and undertaken a series of high-profile raids in major cities.

Officials believe up to 160 Australians have been either involved in fighting in the Middle East or actively supporting groups fighting there. At least 20 are believed to have returned to Australia and have been said to pose a security risk.

Read MoreBritish warplanes hit first Isis targets in Iraq

One man was charged on Tuesday with funding a terrorist organization, while another was arrested last month after police said they had thwarted a plot to behead a randomly selected member of the public.

Prominent Australian Muslims say their community is being unfairly targeted by law enforcement and threatened by right-wing groups, and there are concerns that policies aimed at combating radical Islamists could create a backlash.

Abbott said Islamic State poses a grave threat to both Australia and the wider world and that Canberra could not afford to shirk its responsibility to contribute militarily to "degrading" the group's capabilities.

Read MoreISIS fight widens as UK approves airstrikes

"The Americans certainly have quite a substantial special forces component on the ground already," he said.

"My understanding is that there are U.K. and Canadian special forces already inside Iraq, so we'll be operating on a much smaller scale but in an entirely comparable way to the United States special forces."

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Australia announces airstrikes against ISIS in Iraq