My colleague is an Australian citizen working in Germany.  She is
eligible to apply for German citizenship, but wants to retain her
Australian citizenship too (ie, have dual citizenship).  Germany only
allows this under exceptional circumstances.  I am looking for
examples of things which Germany has, in the past, accepted as
"exceptional circumstances" under their law.

Dear meinadelaide,

Fortunately, German law defines quite exactly the recognized
"exceptional circumstances" under which a person can assume German
citizenship while also keeping the original citizenship. Those
circumstances are defined in §12 of the 2005
Staatsangehörigkeitsgesetz (StAG, Citizenship Law):


§12 StAG

(1) The pre-condition of §10.4 [defining that a foreigner can only
become a naturalized German citizen if he abandons or loses his
previous citizenship] will be abstained from if the foreigner can not,
or only under exceptionally difficult circumstances, abandon his
previous citizenship. This is the case when

1. the laws of the foreign country do not allow for leaving its citizenship,

2. the foreign country constantly denies release from its citizenship
and the foreigner has to deliver an application for release to the
competent authority for forwarding to the foreign country,

3. the foreign country has denied release from its citizenship for
reasons the foreigner is not responsible for; or if the foreign
country makes the release subject to unreasonable requirements; or if
the foreign country has not decided about the complete and correct
application for release within an adequate period of time,

4. the ocurring multiple citizenship would form the only obstacle
preventing the naturalization of aged persons; or if release from
citizenship encounters unreasonable difficulties and denial of
naturalization would mean particular hardness.

5. the foreigner would, when abandoning his foreign citizenship,
experience considerable disadvantages particularly of economic or
proprietary nature that transcend the loss of civic rights; or

6. if the foreigner holds a travel ID card according to Article 28 of
the agreement of 28 July 1951 on the legal status of refugees (Federal
Law Gazette 1953 II p. 559), or a settling permission granted
according to §23.2 of the Residence Law.


(2) The pre-condition of §10.4 will also be abstained from if the
foreigner has the citizenship of another member country of the
European Union and if mutuality is in existence.


(3) The pre-condition of §10.4 may also be abstained from if the
foreign country makes release from the previous citizenship subject to
completion of military service and if the foreigner has received the
predominant part of his school education in German schools and has
grown withing Germany into German circumstances and into the age when
he is liable to military service.


(4) Additional exceptions from the pre-condition of §10.4 may be
allowed for according to treaties under international law.


Those are the recognized "extraordinary circumstances" that allow
naturalization with dual citizenship in Germany. I hope this answers
your question.
Regards,
Scriptor


Source:
German Ministry of Justice: Citizenship Law - §12 (in German)
http://bundesrecht.juris.de/rustag/__12.html

I would start by asking at the Australian Embassy:
http://www.australian-embassy.de/

The website is strongly oriented towards business and emigration to
Australia, but someone there should have experience with your
question.

As you probably already know, since 2002, Australia has no problem
with your establishing dual citizenship.
http://www.immi.gov.au/facts/90citizenship.htm

You also probably know the general description of "exceptional
circumstances" that could justify Germany's allowing dual citizen
ship:
undue hardship, elderly persons, significant financial sacrifice  -
which seems to refer to exhorbitant charges for rejecting the old
nationality; having to forgo the right to inherit property in the old
country, and (...?).

Since a Researcher had a lock on your question but then didn't post
anything, I expect that nothing more useful could be found.

Despite all countries' preferring to avoid dual citizenships, as in
Australia, also in Europe the actual barriers are being lowered.  I
saw a higher court case about an Italian a few years ago (the rules
have since changed), who was refused dual citizenship in Germany with
the real control being his having to surrender his Italian passport to
the German authorities under a 1938 diplomatic note between the two
countries.  The Germans would then have sent the passport to Italy to
have cancellation of his citizenship recorded.

It MAY be  (my speculation!), although German-Australian dual
citizenship is denied by Germany, that there is no true control (e.g.
as in the Italian's case), and a pledge to reject Australian
citizenship is not controlled by reporting it back to Australia, i.e,
in Oz the citizenship still continues.
However, as your colleague probably has heard, if this could be
interpreted as reinstatement of the old citizenship, it would cancel
the German one  (the problem that many Turks are having).

I was hoping to find a couple of websites for Australians in Germany
through which she or you could contact Aussies here who might have
experience with the matter.  The only one I found was this:
http://www.berlin-crocodiles.de/season/index_2004e.html

But it could be a start, perhaps also via the links to the sponsors.

I wish I could help more.  Good luck!