The Federal Government's remote work-for-the-dole scheme is devastating Indigenous communities, with financial penalties causing insurmountable debt and social division, a report has found.

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The Australian National University researchers described Indigenous Affairs Minister Nigel Scullion's Community Development Programme (CDP) as a "policy disaster".

ANU researcher and co-author Dr Kirrily Jordan said financial penalties were being applied unfairly and an example of this could be found in the Ngaanyatjarra Lands in Western Australia.

"The rental arrears across the whole lands, across 12 communities, have gone up from $50,000 to $350,000, in the short space of time since CDP's been introduced," she said.

ANU researcher Dr Inge Kral said she had spent 30 years working in remote communities and the latest scheme had left people struggling to feed themselves.

"People with no money in families, there's no money for food, there's certainly no money for clothes — people are starving, people are begging," she said.

"The whole infrastructure around stores is collapsing because there isn't the reliable secure income coming in."

According to the ANU report, the Centrelink-based system is impractical and devised by Canberra bureaucrats who are out-of-touch with remote community life.

Ms Kral also said people in remote areas were not being properly assessed for the disability pension and could be on the phone to Centrelink for "days", with little regard for language barriers.

"We are not kidding. This is not made up. People sit there for days," she said.

"Someone told me a story the other day about a man who really should be on a disability pension.

"They're now without money, they're on an eight-week no-payment penalty, they haven't eaten for three days, they've got no money coming in and they can't effectively engage with Centrelink by themselves."

'No real engagement' with local Aboriginal organisations

The scheme applies to about 34,000 people, mostly Indigenous, across Australia and was introduced by Mr Scullion in July last year.

CDP increased the number of work hours required for welfare payments to 25 per week, for at least 46 weeks a year.

The current remote work-for-the-dole scheme is one of several revisions and replacements and can be contrasted with the Community Development Employment Projects (CDEP) scheme, which was scrapped in 2009.

CDEP allowed for the pooling of welfare funds, managed by communities for work on local projects and directed to payments equivalent to the minimum wage.

Senator Scullion has rejected the ANU report's findings and said his office and department did not have any input.

"It is disappointing that public debate is being dominated by urban academics like Dr Jordan whose professional experience is limited to being an academic in east coast universities," he said in a statement.

Senator Scullion said the participation rate had increased under CDP and waiver provisions were in place to ensure penalties do not cause financial hardship.

"More than 90 per cent of eight-week non-payment penalties are waived," he said.

The Northern Land Council's chief executive Joe Morrison also contributed to the ANU report.

"There is no real engagement, serious engagement, with local Aboriginal organisations in the bush when it comes to these things," he said.

"This is all designed out of Canberra and it's designed by bureaucrats, who unfortunately have little to do with Aboriginal people."