The federal government has included a review of the terrorism alert system as it rolls out new national security laws to deal with foreign fighters.

Australia is following the lead of the United States and UK in revising the way it alerts the public to terrorist threats.

Attorney-General George Brandis told parliament the escalating terrorist situation in Iraq and Syria and the risk of returning foreign fighters to Australia was the greatest national security threat facing the country in many years.

Senator Brandis, who is preparing new anti-terrorism laws for introduction to parliament in a fortnight, said the government was reviewing the four-tier alert system – low, medium, high and extreme.

This would ensure the descriptions of the various levels are as precise as possible and are more meaningful for the public.

The government is looking at the UK and US systems as models.

The UK has five levels: low, moderate, substantial, severe and critical.

The US also has five levels: low, guarded, elevated, high and severe.

Security officials say 60 Australians are currently participating in conflict zones in Syria and Iraq and another 100 Australians are supporting or facilitating Islamic State, also known as ISIS and ISIL.

However Australia’s national terrorism public alert system level remains at “medium”, which suggests a terrorist attack “could occur”.

The UK has lifted its level to “severe” which means an attack is highly likely.

The move came as former US assistant secretary of state Christopher Hill, who served as ambassador to Iraq from 2009-2010, told AAP that Australia should not rule out doing more to take on IS.

“That is a sovereign decision for Australia to make, but I think that all of our countries have seen some of our citizens go there and participate … so it links us to this crisis directly,” he said.

“It’s quite appropriate that Australia be doing its part.”

He said Americans were not ready for boots on the ground, despite being outraged by the murder of journalists and other atrocities by IS.

“We have a strategy in Iraq which involves air strikes to assist the Peshmerga (Kurdish forces), training packages and equipment,” he said.

The solution also lies in the Iraqi government reaching out to the Sunni community and Sunni countries coming to terms with a Shia-led Iraq.

While IS is, for now, less of a threat to the west than Al Qaeda was, there is “potential for attacking western targets”, he says.

“Given their willingness to take blunt knives and saw peoples’ heads I would not be surprised if they were interested in bombing operations.”

Muslim leaders needed to do much more to condemn the violence, which presented a “serious challenge to the Muslim faith”.

Foreign Minister Julie Bishop is due to meet with allies at the NATO summit in Wales, where the situation in Iraq and Syria and Ukraine will be discussed.

The government and Labor voted in the Senate on Thursday to reject an Australian Greens bill to require that any decision to go to war be made by the parliament as a whole, not just by cabinet.