Maria Elvira Pinto Exposto, who lawyers say is struggling to come to grips with the severity of her situation, made no comment to reporters as she entered the court.

Mrs Pinto Exposto, 51, appeared calm inside the court and nodded her head to indicate she understand the charge that was read to her in English.

No plea was recorded. Judge Noor Hafizah Mohammed Salim fixed January 23 as a date for another hearing pending the completion of a chemist report before the case is transferred to Malaysia's High Court.

Mrs Pinto Exposto was formally charged on Friday with carrying 1.5 kilograms of methamphetamines, the drug known as ice, when she was arrested at Kuala Lumpur international airport on December 7.

Ms Pinto Exposto has told lawyers she was set up and did not know the drug had been sewn into a bag compartment. She claims she believed the bag she was carrying contained legal documents for an American soldier friend serving in Afghanistan. She believed the documents related to the man's retirement, her lawyers say.

The bag was given to Mrs Pinto Exposto as she got into a taxi in Shanghai and she was asked to give it to a person who would be waiting at Melbourne airport, her lawyer Muhammad Shafee Abdullah said. He said the chance of Mrs Pinto Exposto being acquitted was very good.

"It was not even her bag and this drug was concealed," he said. "She has got a more than 50 per cent chance of being acquitted."

Customs officials say Mrs Pinto Exposto followed passengers towards an airport exit and placed two bags through a security scanner.

"When the drugs were found in the bag she was very surprised. She's never seen drugs in her life," said Tania Scivetti, another lawyer representing her.

On Friday Mrs Pinto Exposto's lawyers argued that voluntarily putting the bags through the security scanner pointed to her innocence.

Mr Shafee said Mrs Pinto Exposto was extremely concerned about the charges she faced.

"Her remark to me was: 'But I'm innocent'," he said.

"I don't think it's really hit her yet, what's going on," said Ms Scivetti told AAP before the hearing.

The lawyers had also received a petition from the woman's friends in East Timor, where she had worked for a group advocating against human trafficking.

Foreign Affairs Minister Julie Bishop said the Australian government was providing appropriate consular support to Mrs Pinto Exposto.

"The challenge of course is to remember that people are subject to the laws of another country," Ms Bishop said. "So, we will do what we can to provide consular support but at the end of the day they are subject to the laws and legal system of another country."

In Sydney, her family members  said they were in shock over the arrest. Mrs Pinto Exposto is a mother-of-four who relatives said comes from a simple Timorese-Australian family.

Under Malaysia's decades-long campaign against drugs, death by hanging is mandatory if accused are found guilty of carrying more than 50 grams of methamphetamines. More than 440 people have been hanged in Malaysia since 1960 including Australians Kevin Barlow and Brian Chambers in 1986.

Michael McAuliffe, another Australian, was hanged in Kuala Lumpur in 1993 after being found with heroin in his back pocket at Penang airport security check-point.

Mrs Pinto Exposto has engaged the same high-profile lawyers who defended Perth truck driver Dominic Bird who was earlier this year acquitted of charges of selling drugs to an undercover police officer in Kuala Lumpur in 2012. Mr Bird was also facing the death penalty.

With agencies