A Queensland Indigenous health charity has had to pay $2,200 to use the Aboriginal flag on the shirts it gives away to patients, because the licensing rights of the Aboriginal flag belongs to a private company that is charging high fees for any such reproduction.

The Indigenous Wellbeing Centre (IWC) in Bundaberg gives away a free T-shirt as an incentive to encourage Aboriginal people to come into the clinic for a preventative health check.

The IWC is the latest Aboriginal organisation to run into trouble for using the Aboriginal flag on clothing.

The flag’s designer, Harold Thomas gave a worldwide exclusive licence to a non-Indigenous owned company called Wam Clothing, which has been actively enforcing its copyright since the agreement was announced in November last year.

Several organisations have been affected by the deal, including the AFL and the NRL.

Wam Clothing said the health charity would have to pay 20% of the cost price, to continue using the flag on the free shirts but, “given the nature of your organisation”, it would drop the fee to 15% – if the charity was willing to sign a confidentiality agreement about the reduced fee.

The IWC decided to pay the $2,200 which covered 20% of the cost of the current batch, but decided to remove the flag from the T-shirts it now offers the community.

“This is not right. We’re not the AFL, we are an Indigenous health charity,” IWC spokesperson Janette Young said.

Young estimates that 80.6% of IWC’s clients are “disadvantaged or extremely disadvantaged. There are high rates of chronic disease. We have a high-needs community, and we’re just trying to get some early intervention.

“It’s very, very disappointing. What we’re looking for is for this to be sorted out. We need to know, at a basic community level, how this is going to be sorted out.

“That we have to pay up, just shows how far this has reached.”

Wam Clothing is part-owned by the Queensland businessman Ben Wooster, who was the sole owner of Birubi Art, a now-defunct company fined a record $2.3m in June for breaching consumer law by selling thousands of Indonesian-made items as Aboriginal art.

The federal government has been asked to “do more” to protect the Aboriginal flag, by Labor’s spokesperson on Indigenous affairs, Linda Burney.

“People have told me they feel like the flag is being held hostage,” Burney told Guardian Australia in June.

“The flag is one of our national symbols and a central part of Aboriginal and Australian identity. The flag should be about people and pride, not profit.”

But the Indigenous Australians minister, Ken Wyatt has ruled out buying the copyright of the Aboriginal flag for the commonwealth, saying Harold Thomas and Wam Clothing have publicly indicated their willingness to talk about options for using or reproducing the image of the flag.

• On 3 September 2019 this article was amended to clarify that Wam Clothing holds licensing rights to the Aboriginal flag. The copyright holder is Harold Thomas.