Defence Minister Marise Payne will travel to Manila next week to discuss the conflict between rebels and security forces in Marawi.
Australia has offered Manila assistance with military capacity-building and training on top of the two surveillance planes already deployed there.
But Prime Minister Malcolm Turnbull declined to speculate on the scope of any extra assistance.
"We do not want (IS) establishing a stronghold in Southeast Asia," he told reporters in Kalgoorlie, Western Australia.
"It is vitally in our interests to see that insurgency defeated."
Defence has sent two P-3 Orion surveillance planes to help with intelligence gathering.
Canberra has offered special forces soldiers to help train Filipino troops, but Manila is yet to accept.
The Philippines defence force has been fighting IS militants in Marawi since May and foreign fightersreturning from Iraq and Syria are being drawn there.
The conflict had displaced an estimated 400,000 people.
'Not about troops on the ground': Foreign Minister Bishop downplays assistance
Foreign Minister Julie Bishop has downplayed reports Australia will send special forces troops to help the Philippines fight Islamic State militants.
Ms Bishop stood by her earlier comments that Manila had been offered assistance in advising and training local forces.
"It's far too early to even speculate because the Philippines haven't indicated what level of support or what form that support would take," she told reporters in Sydney on Friday.
"We are talking about advising and assisting and training. This is not about troops on the ground -- the Philippines would not accept that. And it hasn't been offered," she said.
"The Phillippines haven't indicated the level of support they require."
Deputy Prime Miinster Barnaby Joyce said the threat presented by IS in Southeast Asia must be taken seriously.
"We don't want a caliphate in the southern Philippines. I don't think that's going to be good for business in South-East Asia," he said.
"This is not just a problem for Australia, it is a problem for the whole region and the whole region will work together in a concerted way."
Amnesty warns against complicity in rights abuses
Amnesty International urged Marise Payne to seek assurances from the Philippine President Rodrigo Duterte that Australian troops will not inadvertently become complicit in human rights abuses.
Defence Minister Payne will be discussing Australia's offer to send special forces troops to fight IS in a meeting with officials in the Philippines next week.
“Amnesty International Australia has been appalled by reports back in June that the Philippines President Rodrigo Duterte gave his troops an unequivocal license to kill civilians with impunity while fighting ISIS-aligned militants in Marawi," said Amnesty International Australia’s Campaigns Manager Michael Hayworth.
“At a minimum, Australia should be leading calls on President Duterte to protect civilians and make sure that a proportionate response is taken to any alleged threat from extremist groups.”
Battle claims 800 lives
Pro-Islamic State militants took over the southern Philippines city of Marawi in May.
Filippino soldiers have been fighting to take back the city in a conflict that has displaced an estimated 400,000 people.
IS rebels in Marawi are believed to be receiving direct funding from IS in the Middle East.
Close to 800 dead including about 600 militants.
Duterte declares battle is nearing its end
Philippine President Rodrigo Duterte said Wednesday a three-month battle against Islamic State group supporters occupying parts of a southern city was in its "final stages".
Duterte gave his assessment shortly after government troops secured a vital bridge in Marawi city, allowing them easier access into areas being held by the militants.
"We are in the final stages. So let us send immediately, even air-lift, the police," to Marawi, Duterte said in the capital Manila, about 800 kilometres to the north of the battle zone.
Pro-IS gunmen occupied parts of Marawi, the Islamic capital of the mainly Catholic Philippines on May 23, triggering a battle that the military says has left almost 800 people dead.
The fighting, which has included a US-backed air campaign against the militants, has destroyed large parts of Marawi.
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