An elderly Australian woman lay dead for months in her home as her adult daughter, who apparently used air freshener to mask the smell, fraudulently accessed her bank accounts, police said Friday.

The body of the 83-year-old was found in the bedroom of her Sydney home a week ago, but a post-mortem suggested she had been dead for months.

Her 48-year-old daughter, receptionist Melissa Peacock, who was believed to be her primary carer, was not at the premises. On Thursday she was discovered at a luxury hotel in central Sydney and arrested, police said.

"She was arrested and charged with failing to report a death and dishonestly obtaining financial advantage by deception," they said in a statement.

"Police will allege the woman had been fraudulently accessing and obtaining money from her deceased mother's bank accounts on a number of occasions."

A Sydney court on Friday heard that Peacock told police her mother Noreen died on July 28 and that after finding the body she walked from the bedroom, shut the door and had not re-entered since, the Sydney Morning Herald reported.

But the court was told forensic evidence indicated attempts were made to keep the room clean after the woman's death, including changing the sheets and using air freshener to mask the smell, the report said.

The cause of death is not yet known, but a preliminary autopsy suggested she may have died from hypothermia.

Peacock, who is accused of using her mother's money to pay for her accommodation at luxury Sydney hotels, quit her job in July and all her own bank accounts were overdrawn, the Herald added.

She remains in custody pending a bail hearing on Monday.