An image of what is believed to be the young son of an Australian man holding a decapitated head in Syria shows how barbaric the Islamic State "terrorist army" is, Australian Prime Minister Tony Abbott has said.

Abbott made the comment on Monday while announcing Australia would likely join airdrops of food and supplies to thousands of Iraqi civilians besieged by Islamic State fighters and may even participate in airlift operations to take them to safety, possibly later this week.

The picture, taken in the northern Syrian city of Raqa, was posted on the Twitter account of Khaled Sharrouf, an Australian man who fled to Syria last year and is now an Islamic State fighter, The Australian newspaper said.

It reportedly shows Sharrouf's seven-year-old, Sydney-raised son dressed like any other young boy in blue checked trousers, a blue shirt and baseball cap, struggling to hold up the severed head of a slain Syrian soldier by his hair.

It was captioned with the words: "That's my boy."

Another photo published by the newspaper from Twitter shows Sharrouf dressed in camouflage fatigues posing with three young boys it said security agencies believed were his sons.

All are holding guns in front of the flag of the Islamic State, a group that has swept across Iraq and Syria, seizing large areas of territory.

Abbott, speaking to ABC radio from the Netherlands, said the pictures showed the "barbaric" nature of the Sunni fighters formerly known as the Islamic State of Iraq and the Levant (ISIL).

"What we've got to appreciate is that Islamic State - as they're now calling themselves - is 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," he said.

"And this does pose 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."

'Act of a lunatic'

Australia has an arrest warrant out for Sharrouf, who has also been pictured posing with severed heads. Officials have said up to 150 Australians are fighting with rebels overseas, mostly in Iraq and Syria.

Sharrouf, who served almost four years in prison after pleading guilty over a 2005 conspiracy to attack Sydney, fled the country using his brother's passport.

David Johnston, the defence minister, said he was "revolted" by the image, which he called "a shocking misrepresentation of Islam".

"I'm very upset about this sort of thing completely colouring our view of Muslims," he said, while Lebanese Muslim Association president Samier Dandan distanced the Australian Muslim community from it.

"I stand very far from that concept - this is an act of a lunatic," he told the ABC.

Abbott also said Australia was ready to participate in American airdrops to civilians threatened in Iraq, and could also deploy two aircraft for any airlift mission.

American jets and drones have been carrying out strikes against IS fighters in northern Iraq as Washington seeks to turn the tide on two months of their expansion in the region.