Ellison said on Friday that David Hicks could not be charged if he returned to Australia because laws banning association with terrorist groups were not passed until 2002.
"We did not have legislation in place at the time of the actions, which are alleged against Mr Hicks and, therefore, if he was to be returned to Australia, he would not be able to be prosecuted," Ellison told reporters in the west coast city of Perth.
Ellison said the government had ruled out introducing retrospective criminal legislation to apply to Hicks and maintained that the appropriate court for Hicks was a US military commission.
"Our view is that the proceedings against Mr Hicks should continue as quickly as possible," Ellison said.
Hicks is the only Australian remaining at Guantanamo Bay after Egyptian-born Mamdouh Habib was sent home to Sydney in January.
US to keep Guantanamo
Meanwhile, US Defence Secretary Donald Rumsfeld said on Thursday that the United States would rather have detainees at the Guantanamo Bay prison camp and not imprisoned in their home countries.
Rumsfeld spoke a day after saying he was unaware of anyone in the Bush administration discussing closing the prison in Cuba.
"We did not have legislation in place at the time of the actions which are alleged against Mr Hicks and therefore if he was to be returned to Australia, he would not be able to be prosecuted"
US Secretary of Defence
Hours later, US President George Bush refused to rule out shutting the facility, saying his administration was "exploring all alternatives" for detaining the prisoners.
The Australian Greens, a minor opposition party, said Australia should now call for the repatriation of David Hicks, a former kangaroo skinner, who was arrested while allegedly fighting against the US invasion of Afghanistan.
Hicks is facing trial before a US military commission on charges of conspiracy, aiding the enemy and attempted murder.