Prime Minister Malcolm Turnbull says a Labor MP should not be sitting in parliament as she is still a UK citizen, but he's declined to refer her to the High Court.
Queensland-born MP Susan Lamb's father was born in Scotland in 1945 and his parents were born in the UK.
The member for Longman said in her citizenship declaration to parliament she "may have acquired British citizenship by descent" via her father.
She completed a renunciation form on May 24 last year and payment for processing the application was taken by the UK Home Office on June 6, three days before nominations closed for the election.
But on July 7, 2016, the Home Office wrote to her saying "we cannot be satisfied from the documents available that you hold British citizenship. The application has therefore been refused."
Ms Lamb, who ticked a box on the parliamentary form saying she was a British citizen at the time of nomination, says she has legal advice stating she satisfied all legal requirements for renouncing British citizenship.
But Mr Turnbull told parliament on Thursday Ms Lamb was in the same position as former One Nation senator Malcolm Roberts, who was disqualified by the High Court in October.
"Her declaration makes it clear that her attempts to renounce her British citizenship were unsuccessful and so she is in the same position as Senator Malcolm Roberts," he said.
"She has declared she's a UK citizen. She should not be sitting in the parliament."
Labor sought to refer Ms Lamb to the court on Wednesday, as part of a group of nine parliamentarians, including four Liberal MPs, but the government voted it down.
