Reports that an Australian terrorist, notorious for holding up the severed heads of Syrian victims, has been killed fighting in Iraq have raised the potential for his young family to be repatriated from the Middle East, Australia’s foreign minister said.

The grandfather of a seven-year-old boy pictured clutching the severed head of a Syrian soldier has urged the Australian government to bring the child home.

The photograph of a young boy holding the decapitated head of a slain Syrian soldier and published in Australian media underscored the barbarity of Islamist State militants, Australian prime minister Tony Abbott said.

Australia has issued arrest warrants for a pair of Australian citizens believed to be fighting in Syria, the Australian Broadcasting Corporation (ABC) reported, after images emerged of the two holding the severed heads of Syrian soldiers.