KUTA, Indonesia (AFP) - Friends and relatives of Australian victims of Indonesia's Bali bombings have expressed outrage after learning that the site of a destroyed nightspot is being used as a makeshift public urinal.

"Don't urinate here" is spray-painted in Indonesian along the wall of a lot where the Sari Club stood before Islamists attacked it on October 12, 2002.

The militants also bombed Paddy's Bar across the road, killing 202 people including scores of foreigners.

Among the dead were 88 Australians and many of their countrymen are streaming into Bali to commemorate the attack's 10th anniversary on Friday.

To their dismay the site, which has long been considered for a possible 'peace park', has been used as a parking lot - with locals reporting that people regularly urinate on the wall.

"The urinating is totally disgraceful and disrespectful to the people who lost their lives on that fateful night," David Marshall, who lost his father in the bombings, told reporters near the site late on Tuesday.

"We've got people getting drunk on the sites where our loved ones died. We have people parking cars and motorbikes, and selling drinks on a spot which in history will go down as one of the worst times ever in Kuta, and for Australia, and the other nations involved," Mr Marshall said.

The Australia-based Bali Peace Park Association has been trying to buy the lot to build a remembrance park with funds from the Australian government and Bali's governor.

It has offered more than S$1.2 million to purchase the land, according to Australian media reports, but the owner has asked for seven times the sum.

"A place where so many of my friends died and a lot of others died, it would just be a shame to leave it how it is," said survivor Phil Britten, 32, who is scarred from severe burns to his body from the blasts. "I'd call it a sacred ground."