A sovereign citizen is someone who rejects the legitimate authority of the government they live under, including the police and other authorities of state.
The ideas originated in the United States in the 1970s. They are based in a conspiracy theory that the government created by the Founding Fathers was secretly replaced by a corporation that enslaves all Americans through secret trust accounts and agreements with foreign investors. This started either during the American Civil War or in 1933 when FDR abandoned the gold standard (the details are hazy). The founding group held anti-government, anti-Semitic and extreme Christian Identity beliefs.
The movement grew in the 1990s and spread to other countries, including Australia.
According to the theory, the US government controls its citizens by creating a legal identity for everyone at birth. Sovereign citizens call this your ‘strawman’. The name of your strawman is written in capital letters on your birth certificate. This is followed by a social security number, car registration, and other state-issued documents.
Sovereign citizens believe in a natural, ‘flesh-and-blood’ person distinct from the strawman. They use various strategies to assert this true identity and escape their ‘corporate shell’. They might write their names in lowercase letters or sign documents with red ink or blood (as black and blue pens signify corporations).
In Australia, the beliefs are localised, beginning with a similar conspiracy that our government was secretly replaced with a US-owned corporation. The most likely culprit is the Whitlam government in 1973, or the drafters of the Constitution might have stuffed up the paperwork at Federation.
Someone who identifies as a sovereign citizen does not necessarily know or believe in all the backstory. But common expressions they use invoke this purported history.