The Australian Competition and Consumer Commission (ACCC) told the Federal Court that the US tech giant had agreed to the penalty for implying in advertising that the 4G function on its latest iPad worked in Australia.

Apple offered in March to refund Australian customers who felt they had been misled by the "iPad with WiFi + 4G" promotion and publish a clarification about the popular tablet's capabilities after the ACCC took it to court.

Though the iPad's 4G function only works on networks in the United States and Canada it had been widely promoted as one of the tablet's features globally, which the ACCC said amounted to false advertising.

It is now advertised outside North America as "Wi-Fi + Cellular", with a clear caveat on its Australian site that "it is not compatible with current Australian 4G LTE networks and WiMax networks."

The matter was due to go to a full trial this week but ACCC lawyer Colin Golvan said Apple had agreed to pay the Aus$2.25 million fine and the commission's legal costs as part of an out-of-court settlement.

Golvan said the "substantial" penalty would send a strong message to the booming smartphone and tablet industry that "such conduct will not be condoned", according to a report of the hearing in The Australian newspaper.

But judge Mordecai Bromberg refused to make an official court order until he had the details of how many iPads had been sold and were returned under the refund offer, along with information about the extent of the 4G advertising.

"The parties put forward proposed settlement and consent orders, however His Honour requested further information to be provided for the consideration of the court, which will happen next week," an ACCC spokesman told AFP.

Apple agreed to provide a confidential brief to the judge by June 13, with a final decision on the penalty and settlement of the case to be handed down at a later date.