The Federal Government's plan to drug-test welfare recipients has been slammed by anti-poverty advocates who say it is a discriminatory tool for profiling vulnerable people.

The plan includes a trial scheme, starting next year, which will see 5,000 new welfare recipients tested for illegal drugs.

Those who come up positive will be placed on a cashless debit card for their payments, or even have their benefits removed for a period of time.

Newstart Allowance recipients would be selected for the trial "on a random basis, based on a data-driven profiling tool developed for the trial to identify relevant characteristics that indicate a higher risk of substance abuse issues," according to budget papers.

What remains unclear is how the drug-test policy will specifically identify people "at higher risk", and how the Government plans to measure if the program is working.

But what is apparent is it is not too hard to find Centrelink recipients who would fail a drug test.

One such drug user, named Dutchie, who spoke to the ABC on the streets of inner Melbourne, said a loss of benefits could have dire consequences for him and his friends.

"To be honest, I'd be on the street, walking down the road as a peddler, going 'Hey, do you want heroin? Do you want ice?' Because that's the only way we're going to survive," he confessed.

Drug tests 'anything but random'

VCOSS CEO Emma King says under the planned drug tests people are targeted "because they are poor". ( ABC News: Norman Hermant )

The Victorian Council of Social Services (VCOSS) argues the profiling tool is based on discriminatory assumptions.

"It's anything but random, because you're actually targeting people because they are poor," VCOSS CEO Emma King told the ABC.

"In many instances it's because they are likely to have a history of drug abuse or something else along those lines.

"On the basis of the information we have at hand, it sounds like Centrelink are absolutely profiling people that they intend to drug test, and that they have made a whole lot of presumptions about."

Homelessness Australia argues the scheme is cruel and inhumane, and will push people onto the streets.

"I'm not sure why we would want to fast-track vulnerable people in our community into not having any income and into homelessness," said chairwoman Jenny Smith.

"It makes getting them housing quickly, impossible.

"If you are renting, then you won't have the money to pay your rent. So it's as simple as not having the money to keep the roof over your head."

Scheme difficult to implement, health experts say

Sorry, this video has expired Treasurer Scott Morrison announces welfare policies in the federal budget for 2017.

Deputy Prime Minister Barnaby Joyce has defended the proposal as a means of ensuring the integrity of the welfare system.

"You should present yourself in a capacity you are ready to go to work," he said. "You can't go to work if you are smashed or drugged out."

But health experts say that when other countries have tried similar schemes, they have been difficult to implement and measure.

"It's been tried in the UK and the United States, but there is no good information on the outcomes," said Professor Michael Farrell from the National Drug and Alcohol Research Centre.

"In general, the picture has been one that has turned out to be far more complicated and complex to implement than was originally thought."

A Department of Social Services spokesperson told the ABC "the Government will make further announcements about the trial at an appropriate time".