In isolation, Australia's an island (4)
I believe the answer is:
iona
'island' is the definition.
(Scottish island)
'in isolation australia's an' is the wordplay.
'in' indicates a hidden word.
'IONA' can be found hidden inside 'isolation australias an'.
(Other definitions for iona that I've seen before include "small island" , "Inner Hebridean island" , "early Christian centre" , "St Columba's monastery isle" , "Site of St Columba's monastery" .)