The cashless debit card scheme is government-sanctioned financial abuse, a single mother placed on the income management program against her will says.
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Social exclusion, stigma and a lack of financial flexibility associated with the card had devastating mental health impacts for Kerryn Griffis and her daughters.
Ms Griffis told a parliamentary committee her life became more difficult when she was placed on the card.
"You hear politicians banging on about how great it is and that 'it's a tough but necessary measure' but it's all rubbish," she said on Tuesday.
"They're either wilfully ignorant or they just don't care about the real-life impact this card is having on people.
"As a domestic violence survivor, I can tell you right now that the ... program is, simply put, government-sanctioned financial abuse."
The committee is examining a proposal by the Albanese government to abolish the cashless debit card which would shift more than 17,000 welfare recipients away from the scheme.
The debit cards were introduced by the Liberal-National coalition in 2016 and introduced in several communities, including Ceduna in South Australia and Cape York in far north Queensland.
Under the scheme, up to 80 per cent of welfare payments can be placed on the cards and funds cannot be withdrawn for cash or spent on gambling or alcohol.
Single mother of five Bianca Chatfield told the committee she needed permission to buy a particular bra when using the card.
Ms Chatfield was asked to send a photo and details of the prospective purchase to the social services department which she described as a major invasion of her privacy.
"If I did have a partner ... and I had to ask permission to buy anything like that, such personal items, it would be considered domestic violence," she told the committee.
"It is not OK (and) I don't see how the government thinks that that's acceptable."
Both women were placed on the card automatically due to where they were living as part of a trial of the scheme.
Bundaberg Regional Council mayor Jack Dempsey told the committee the card was divisive and had led to the region being denigrated since trials began.
"If you want this card, introduce it into your own communities but don't impose it on our communities," he said.
Meanwhile, a leading Indigenous think tank said models of income management had been successful in some remote communities.
The Cape York Institute is urging the government not to apply a blanket approach but rather allow communities to decide on a model for themselves.
A Family Responsibilities Commission (FRC) local authority model has worked well in remote areas, strategic adviser Zoe Ellerman told the committee.
Under the model, elders and respected people within the community make decisions about who requires income management assistance.
"We absolutely urge the government to see the FRC model preserved, it's a very nuanced and highly sophisticated model of welfare reform," Ms Ellerman said.
"(FRC) is a very different model ... it is an empowerment model."
The government must not underestimate the implications for remote communities when it considers repealing the card, Cape York Land Council chairman Richie Ah Mat said.
"You guys will repeal this thing and then you'll walk away ... and leave us to the violence, leave us to the hunger, leave us to the neglected children," he said.
"It's very easy to forget about remote communities."
Australian Associated Press