DENPASAR (AFP) - An Australian woman has been named a suspect in the murder of an Indonesian policeman on the resort island of Bali, her lawyer said on Saturday (Aug 20).

Ms Sara Connor and British man David Taylor were arrested on Friday over the brutal murder of traffic police officer Wayan Sudarsa.

His body was found with wounds to the head and neck early on Wednesday on Kuta beach, a popular tourist hangout in the south of the island.

The police naming Ms Connor as a suspect is a formal step in the Indonesian legal system which means detectives have enough evidence to consider filing charges.

"Her status is now as a suspect. They presume it was murder," Ms Connor's lawyer Erwin Siregar told reporters in Denpasar.

"The maximum sentence for that is 15 years," he said, adding she could also face lesser charges related to the murder.

The authorities launched a hunt for Ms Connor and Mr Taylor after Ms Connor's ATM card and driver's licence were found at the crime scene.

Police also found a smashed beer bottle and damaged surfboard at the scene they believed were used in the attack on Sudarsa.

Mr Siregar said the pair had drunk beer before going to the beach around 11pm, where there was "kissing". No drugs were involved, he added.

Mr Siregar said Ms Connor was "sad" and the police postponed the interrogation on Saturday after she complained of being tired.

"That's why we stopped the investigation today, otherwise we will be here until midnight," he said.

The status of Mr Taylor's case is not yet clear.

Police previously said witnesses had claimed they saw a man with dreadlocks - like Mr Taylor - arguing with a police officer.

A man and woman matching their description were later spotted asking a motorcycle taxi to take them to a hotel but the driver refused as the man was covered in blood.

Bali, a pocket of Hinduism in Muslim-majority Indonesia, is a popular tourist destination known for its tropical climate and palm-fringed beaches.

Petty crime is common but murders are rare.