EXPATRIATE staff from Australia are being faced with a dilemma over the initiative to allow them to transfer to local terms of employment. An overseas officer has to become a British Dependent Territories Citizen (BDTC) to qualify for the plan, but Australians are not allowed, under their country's nationality law, to hold two passports. If they opt to work for the Government, they have to give up their Australian nationality. The new plan would put the second largest group of expatriate civil servants in Hong Kong in a difficult position, said the chairman of the Association of Expatriate Civil Servants, Allan Roger. ''While most of our members could apply for BDTC status without the risk to their current nationality, Australian citizens may have to give up their nationality,'' Mr Roger said. The 1,066-strong association has 125 Australian members. At present, an expatriate who has lived for five years in Hong Kong, or for three years after marriage to a local citizen, can apply for the BDTC. The association wants the Government to accept a seven-year term of residency - the period laid down in the Basic Law - as an alternative definition of a permanent resident eligible for the BDTC.