A mentally-ill Australian woman found by Aborigines in a remote Cape York township spent 10 months in immigration detention after a major identification bungle by authorities.

The immigration department confirmed Cornelia Rau, 39, who was only speaking German, was placed in detention last April when Queensland police could not identify her.

The former Qantas flight attendant, who was reported missing last August after leaving Sydney's Manly hospital on March 17 last year, was free and being treated at Adelaide's Glenside psychiatric hospital. Efforts were being made to reunite her with her family.

Refugee advocates said she had spent at least the past two months in isolation at the Baxter detention centre, in South Australia's far north, without access to medical treatment.

Ms Rau, who came to Australia from Germany when she was 18 months old, was found by Aborigines at Coen on remote Cape York Peninsula in north Queensland on March 31 last year.

Queensland police defended their handling of the case.

"The woman gave police what is now known to be false names and these were checked against missing person's data bases in Australia," police said in a statement.

"When these checks and other inquiries failed to positively identify the woman, police formed the opinion she may be a suspected non-citizen because of statements she had made and the language she was speaking.

"She was transported by police to Cairns and handed to immigration officials after all efforts to identify her had been exhausted."

Police sought advice from the German consulate, but officials were unable to verify her nationality or identity, they said.

An appeal was published in German newspapers to identify the woman, but was unsuccessful.

They handed her to immigration officials on April 5.

The immigration department said it had gone to great lengths to establish the identity of Ms Rau.

"All the information provided by the woman led the department to believe she was an unlawful non-citizen," a departmental spokesman said.

"At no time did she state she was a permanent (Australian) citizen."