Australian jihadists joining fighting forces in Syria and Iraq are overwhelmingly coming from NSW and Victoria, and the federal government is forging new intelligence ties with Middle Eastern countries to deal with the threat.

At least half the roughly 150 Australians involved with extremist groups in Syria and Iraq come from NSW. A ''substantial'' number come from Victoria, and these two states dwarf numbers coming from other states and territories, a senior source said.

Cancelling passports: Julie Bishop. Credit:Alex Ellinghausen

Most of the Australians are understood to be fighting with Sunni extremists in the Syrian civil war, while about 10 are known to have travelled to Iraq, joining the Islamic State in Iraq and the Levant (ISIL), which is surging towards Baghdad with plans to overthrow the Iraqi government.

So serious is the threat that intelligence officials are working closely with governments in surrounding Middle East countries including Lebanon and Jordan - countries with which Australia does not has a close intelligence relationship. The government is also considering ways to change laws to make it easier for our spy agencies to track Australians overseas.