Ottawa is suspending a policy that saw transfer funding clawed back from self-governing First Nations that generate their own revenue. The moratorium will last "up to three years", while a new self-government fiscal policy is developed.

Indigenous and Northern Affairs Minister Carolyn Bennett made the announcement in Carcross, Yukon on Tuesday afternoon, where the Council of Yukon First Nations (CYFN) is holding its annual general assembly.

CYFN represents Yukon's 11 self-governing First Nations.

"The reason we're holding this announcement here is mainly because of the advocacy and the strong voices of the Yukon First Nations," she told the roomful of chiefs.

Bennett said Indigenous governments have been pushing for changes to the "own-source revenue" policy.

"Canada has listened ... and agreed," she said.

"I believe this moratorium reflects true reconciliation in action, or what we now lovingly refer to as 'reconcili-action,'" she said.

Bennett spoke at the Council of Yukon First Nations' annual general assembly in Carcross, on Tuesday. (Mike Rudyk/CBC)

'Own-source revenue'

Under Canada's "own-source revenue" policy, federal transfers to self-governing First Nations are offset by revenues raised by those First Nations themselves, for example, through taxes or business income.

According to the government's website, the purpose of the policy is to take into account "the ability of self-governing groups to contribute to the costs of their own government activities."

The expectation was that over time, self-governing First Nations would become less reliant on federal transfers.

The suspension of the policy means self-governing First Nations will keep all revenues they generate, along with federal transfers.

Eva Clayton, president of the Nisga'a Nation and co-chair of the Land Claims Agreement Coalition (LCAC), welcomed the news.

"LCAC members work hard to develop sources of revenue for their governments and their citizens or members. By ensuring that those revenues remain in the community, the moratorium will greatly assist LCAC members in their efforts to improve the lives of their people," she said, in a statement.