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Australia is suing the local arm of Volkswagen for allegedly misleading customers by selling modified vehicles that covered up emissions fraud.

Its consumer watchdog claims Volkswagen intentionally sold more than 57,000 such vehicles over a five-year period.

The Australian Competition and Consumer Commission (ACCC) is seeking a public declaration of misconduct, financial penalties and corrective advertising.

Volkswagen Australia said it is reviewing the ACCC claims.

In a statement, the firm said it does not think that the court action "provides any practical benefit to consumers because software solutions for cars affected by the voluntary recall are expected soon".

"The best outcome for customers whose vehicle is affected is to have the voluntary recall service updates installed," Volkswagen Group Australia managing director Michael Bartsch said.

The ACCC lawsuit covers 10 Volkwagen car models including the top-selling Golf, Passat and Polo,

"These allegations involve extraordinary conduct of a serious and deliberate nature by a global corporation," ACCC chairman Rod Sims

"We expect higher standards of behaviour from all companies that supply to Australian consumers."

Volkswagen, the world's second-biggest car maker, is also facing several private class action lawsuits in Australia.

The carmaker has suffered a global backlash since revealing last year that around 11 million of its vehicles had software or so-called "defeat devices" designed to bypass official emissions tests.

It has since had to pay billions of dollars in fines and settlements with both regulators and customers around the world.

Last month Volkswagen told a court it plans to compensate American car dealers affected by the scandal.