The children of Australian terrorists fighting overseas would be kept under the "closest possible supervision" by security agencies if they return home, Prime Minister Malcolm Turnbull has said.

Key points: A new image has emerged showing the 6yo son of IS fighter Khaled Sharrof

A new image has emerged showing the 6yo son of IS fighter Khaled Sharrof PM Malcolm Turnbull says the images showed the "depths of barbarity, of cruelty, of savagery" IS have sunk to

PM Malcolm Turnbull says the images showed the "depths of barbarity, of cruelty, of savagery" IS have sunk to Mr Turnbull says children of terrorists who are permitted to return home will be closely watched by intelligence agencies

A new image has emerged showing the six-year-old son of Islamic State fighter Khaled Sharrouf posing next to the body of a man who has been crucified.

There is a poster strung around the dead man's neck declaring him a "traitor" in Arabic.

The ABC's 7.30 described the picture last week, and it was broadcast on commercial television last night. However the ABC has chosen not to publish it.

Sharrouf has also previously posted horrifying images of another son holding the severed heads of pro-Syrian government soldiers.

Mr Turnbull said the images showed the "depths of barbarity, of cruelty, of savagery, that Daesh [Islamic State] have sunk to".

The children's grandmother, Karen Nettleton, has been waging a campaign to get them out of Syria and bring them home to Australia.

Mr Turnbull said the children of terrorists would be permitted return home, if they were Australian citizens.

But he made it clear they would then be closely watched by intelligence agencies.

"All of the children that are being exploited in this way, if they are Australian citizens, of course, would be able to return to Australia, but under the closest possible supervision and observation," Mr Turnbull said.

"I can assure you that we will leave no stone unturned in protecting Australians from those people who return from that conflict zone.

"If they are adults, they will obviously be prosecuted to the full extent of the law."

'More of the same for agencies': AFP

Federal and New South Wales police are both investigating the latest image.

Australian Federal Police Commissioner Andrew Colvin said the Australian community would be shocked by it — but it was "more of the same" for security agencies.

"I think it says a lot more about Khaled Sharrouf than it does about his children," Commissioner Colvin said.

"We're all working very closely with our partners overseas and of course the ultimate aim is to prosecute Khaled Sharrouf."

Earlier this year Sharrouf became the first Australian dual national to be stripped of Australian citizenship under anti-terror laws.

That means the 35-year-old cannot legally to return to Australia from the Middle East.