In Australia, there has been confusion and misunderstanding surrounding the term 'fatwa'. This goes both to its meaning and also to the role fatwas fulfil for Muslims, whether in Australia or in other parts of the world. This paper seeks to address both of these issues, first by demystifying fatwa through exploration of the distinctive place the have in Islamic jurisprudence, and second by identifying the methodology used by jurists in ifta (the giving of fatwas), which has enabled Islamic law to be responsive to new developments and contemporary challenges. Given the recent expansion of technological, economic and medical advances and the pattern of migration of Muslims to secular societies, the paper argues that the need for fatwas is in fact increasing as Muslims strive to accommodate Islamic religious requirements within these new environments. The paper surveys the sources of Islamic authority in Australia, concluding that a process of collective ijtihad (independent legal reasoning) would best be suited to the diversity that is the hallmark of Islam in Australia. However, it is stressed that this would not lessen the primacy of Australian law but rather would complement it, as fatwas give guidance to Muslims Australians in the personal, individual and private spheres of life.