Arrest warrants have been issued for the two most prominent Australians fighting for a banned terrorist group in Syria and Iraq, following the publication several days ago of gruesome photos of one of them brandishing severed heads.

There is deepening concern among intelligence agencies about the potential for the bloody Syrian and Iraqi civil wars to spill over onto Australia's shores, with Attorney-General George Brandis saying the threat presented by returning Islamist fighters is the greatest threat to Australian security in years.

The ABC's 7.30 program can reveal that New South Wales Police have issued warrants seeking the immediate arrest of Khaled Sharrouf and Mohamed Elomar for terrorism offences if they return to Australia.

The two Sydney men travelled to Syria and then Iraq late last year and joined the most vicious of the Al Qaeda-linked groups fighting there, the Islamic State, formerly known as ISIS or ISIL.

WARNING: THIS STORY INCLUDES GRAPHIC CONTENT.

Elomar pictured with heads of Syrian government soldiers

The existence of the warrants was confirmed amid outrage after a Twitter account, purporting to belong to Sharrouf, published photos on Thursday and Friday of Elomar holding the severed heads of Syrian government soldiers.

In one photo Elomar holds up two severed heads. In another, he presents one head to the camera, with another three on the floor beside him.

The heads belong to soldiers who were killed late last week during fighting in the northern Syrian city of Raqqa, which has seen some of the bloodiest fighting of the war.

"The Australian government came out very strongly on Friday criticising the type of behaviour that those two gentlemen are allegedly involved in, [saying] that they should not set foot back in Australia," Australian Federal Police counter-terrorism head Neil Gaughan told 7.30.

"If they do, we can assure the Australian community that we have first instance warrants for their arrest.

"As soon as they set foot on Australian soil they will be taken into custody."

Brandis raises concerns over possible attacks in Australia

In an interview with 7.30, Attorney-General George Brandis also made the first public reference to recent intelligence warnings that Australian citizens have been trained in Syria or Iraq to undertake terrorist attacks in Australia and elsewhere.

Mohamed Elomar brandishes the heads of Syrian government soldiers ( Supplied )

"There is evidence that they are trained in terrorist tradecraft to perform acts of domestic terrorism in the event that they return either to their home countries or go elsewhere after they have been in theatre," Senator Brandis said.

"So that is a new and very alarming development."

He confirmed that Australians were among those being trained.

"That's why I've said several times now that this is the biggest threat to Australian domestic security in many years."

Western intelligence agencies have become increasingly concerned about the potential for the Syria and Iraq conflicts to result in terrorist attacks back home.

In May, a returned fighter opened fire at a Jewish museum in Brussels, killing four people.

Last week the Norwegian government announced it had reliable intelligence suggesting an attack was imminent, prompting Australia to issue new travel advice for that country.

"The one thing no Australian should ever think is that this is a problem that exists on the other side of the world," Senator Brandis said.

"Because while it may take shape on the other side of the world, the number of Australians who are participating in this war fighting in Syria and Iraq shows that this is a problem that exists and germinates within our suburbs, within the suburbs of Sydney and Melbourne and Brisbane."

The Federal Government is using the concerns about returning fighters to push through a suite of reforms to Australia's federal counter-terrorism laws.

Senator Brandis told 7.30 he was considering lowering the evidentiary bar used by police investigating terrorism offences.

He said he was also considering modifying the language regarding an offence related to providing vocal support for terrorist acts.

Mr Gaughan said the AFP had struggled to pursue cases against Australian Islamists because of the lack of strong, verifiable evidence.

"We are [in the] dark in relation to what occurs there a lot of the time because there is no competent authority to deal with. We’re not getting the normal intelligence feeds," he said.

- Editor's note: earlier versions of this story said the arrest warrants had been issued by the AFP. This has now been corrected.