AUSTRALIA'S armed forces needs to be protected from any risk of being charged with terrorism, an expert committee has recommended.

The committee's review of Australia's counter-terrorism legislation says the present definition of a terrorist act theoretically encompassed Australian forces in authorised military operations abroad.

"Such a situation is clearly undesirable," the review tabled in parliament on Tuesday said.

"The committee considers that conduct done in the course of ... a person's service in any capacity with the Australian armed forces should be exempted from the definition of terrorism."

Attorney-General Mark Dreyfus said the report by a joint commonwealth-state panel - and a related one by Bret Walker SC into national security legislation - would be considered seriously.

He said the reviews were undertaken to help protect Australia while administering national security and counter-terrorism laws "in a just and accountable way".

Other recommended changes to the definition of a terrorist act by the COAG committee include adding a "hoax threat".

It said a terrorist-related hoax could cause alarm and distress and divert emergency services. However, the penalty should be less than that applied to a genuine threat.

The committee said harm from terrorism should include psychological harm and could apply to victims of mass-casualty attacks and to hostages.

It said rarely used control orders should be kept.

But it believed there should be greater safeguards against abuse and to ensure fair hearings.

It also recommended that only Federal Court judges be empowered to make control orders.

The committee split over preventative detention.

However, the majority said commonwealth, state and territory detention should be repealed.

If any form of it was retained, it would need complete restructuring which may reduce its operational effectiveness.

The committee rejected a call by the Australian Federal Police for a new offence of funding a terrorist organisation through negligence.

A negligence-based offence in counter-terrorism laws was not appropriate, it said.