Jewish schools and institutions in Australia are on "lockdown" following the ongoing siege at a café in Sydney involving a gunman using a flag bearing Islamic ideology.

Pupils at Jewish schools are reported to have been sent home for the day and added security measures are in place as a precaution in the wake of the hostage situation at the Lindt café in Sydney.

Planned excursions and trips have also been cancelled for safety reasons, with officials at one school in Melbourne reported to say this is purely a precautionary measure and they are "not alarmed" by the incident.

As many as 30 hostages could be held inside the building by at least one armed suspect. At one stage, hostages were forced to hold up a black flag similar to that flown by the Islamic State (IS), which contained the words "There is no god but God, Muhammad is the messenger of God".

Five people - three men and two woman – have already fled the building, but it is not known if they escaped or were set free.

A motive for the hostage situation has not yet been established, but Prime Minister Tony Abbott said there is "political motivation" behind the "very disturbing incident".

Vic Alhadeff, CEO of the New South Wales Jewish Board of Deputies, told the Times of Israel the Jewish community are now on a "level of extreme alert".

He added: "We share enormous concern with all Australians in regards to what is taking place. It is still unclear which organisation is responsible. Never before has it happened in Australia that over 30 people have been held hostage at gunpoint."

The Australian Muslim community have expressed their "utter shock and horror" at the scenes emerging from the Lindt Café.

A spokesperson added: "We reject any attempt to take the innocent life of any human being, or to instil fear and terror into their hearts. Any such despicable act only serves to play into the agendas of those who seek to destroy the goodwill of Australia and to further damage and ridicule the religion of Islam and Australian Muslims throughout this country.

"We remind everyone that the Arabic inscription on the black flag is not representative of a political statement, but reaffirms a testimony of faith that has been misplaced by misguided individuals that represent no one but themselves."