The Australian prime minister has slammed a "barbaric" photo which apparently shows the nine-year-old son of a terrorist holding the severed head of a Syrian soldier.

Khaled Sharrouf - who travelled from Sydney to the Middle East to join Islamist extremists fighting jihad in the region - posted the picture on Twitter last week with the caption "That's My Boy!", The Australian newspaper reported.

The graphic image shows the youngster - wearing blue checked shorts and a blue "Polo For Kids" T-shirt - struggling to hold the victim's head by the hair.

A Twitter account linked to Khaled Sharrouf has been suspended after it was used to post a series of messages and photos promoting the campaign being waged by Islamic State, formerly known as ISIS.

Another of the images shows Sharouf posing in front of a black Islamic State flag with his three sons, all of them dressed in military fatigues and brandishing guns.

Tony Abbott said the "hideous" images demonstrated the brutality of Islamic State fighters, who have gained control of a large swathe of Syria and Iraq.

He told ABC radio "There are more photographs in newspapers in Australia today of the kind of hideous atrocities that this group is capable of. Islamic State - as they're now calling themselves - it's not just a terrorist group, it's a terrorist army and they're seeking not just a terrorist enclave but effectively a terrorist state, a terrorist nation."

"This does pose extraordinary problems — extraordinary problems, not just for the people of the Middle East, but for the wider world and we see more and more evidence of just how barbaric this particular entity is" he added.

US Defense Secretary Chuck Hagel - currently visiting Australia - said the photograph showed the threat Islamic State (known as ISIL in the US) poses to the Western societies.

He said "ISIL is a threat to the civilised world, certainly to the United States, to our interests, as it is to Europe, it is to Australia."

Sharrouf was among nine men accused of stockpiling bomb-making materials and plotting terrorist attacks in Sydney and Melbourne in 2007. He pleaded guilty to terrorism offences and was jailed for four years in 2009.

He was banned from leaving Australia due to the terrorist threat he posed, but managed to escape with his wife and three sons last year by using his brother's passport.