Common sense suggests you shouldn't use any GPS in a car without it being mounted -- but even if it is, the law could see you getting busted if that GPS is attached to a phone.
Nick over at Gizmodo has been looking into the whole issue of whether it's legal to use a GPS built into a smart phone. There's no question that you can't use a phone to make calls unless it has hands-free operation, but it turns out there's no equivalent provision for using a GPS, while there is a provision in the model road rules used as the basis for traffic laws in most states that explicitly bans the use of a phone-connected GPS. In NSW, that could mean a fine of $253 if you get caught (and the police recognise your device as a phone).
Obviously the sellers of phone GPS applications don't see this as a problem; Suna, for instance, is actively working on smartphone versions of its traffic information systems. But it looks like, yet again, the law isn't keeping up with technology.