Two of Australia's most wanted terrorists reportedly killed in Iraq

Authorities believe two of Australia's most wanted terrorists Khaled Sharrouf and Mohammed Elomar have reportedly been killed in fighting in Mosul.

According to ABC's 7.30 Sharrouf and Elomar were killed while fighting with Islamic State in Iraq.

ABC reports that a contact close to the family believes the pair died in Mosul in the past few days.

Sharrouf made headlines when he posed with the decapitated head of a slain Syrian soldier.

The Sharrouf family recently hit the headlines when it came to light that his wife and children wanted to return to Australia.

Mohammad Elomar. Photo: Yahoo7

The wife of a notorious Australian Islamic State fighter who wants to return home with her children will face the full force of the law, Prime Minister Tony Abbott has vowed.

"That's what the Australian public expect. Crime will be punished," he told reporters in Canberra on Wednesday.

Mr Abbott was responding to reports the family of Khaled Sharrouf's wife Tara Nettleton is trying to help her and the couple's five children return to Sydney.

She is suspected of helping to spirit her children to Syria via Malaysia after Sharrouf flew out of Sydney in December 2013 using his brother's passport.

Khaled Sharrouf has reportedly been killed in Mosul. Photo: Yahoo7

"Crime is crime is crime, and criminals will face the full severity of Australian law, whether they're male or female," Mr Abbott said.

He dismissed suggestions the family's return could be used to discourage others taking up the IS cause.

"I'm afraid you don't get off scot-free just because you say I've seen the error of my ways," he said.

"If you commit serious crimes you should face serious punishment and as far as I'm concerned that will always be the case."

Mr Abbott also dismissed concerns about the couple's children should their mother be jailed.

"There are criminals who go to jail all the time and they have children."

Earlier, Immigration Minister Peter Dutton said it was up to the family to put in place care arrangements.

Labor leader Bill Shorten agreed foreign fighters should face the full force of the law if they returned to Australia, but will seek more information from the government about the children's fate.

"I cannot understand any parent who would take their children to these war zones," he said.

"I don't understand what is in the mind of these people," he said.

Attorney-General George Brandis wouldn't comment specifically on the family, but said child welfare would have to be considered in such cases.