Desperately needed GST money is being ripped from remote Aboriginal communities as more urbanites self-identify as indigenous, the Yothu Yindi Foundation says.

A boom in urbanites identifying as indigenous is taking much needed GST money from marginalised communities in the bush, a Northern Territory Aboriginal body has said.

The Yothu Yindi Foundation has told the productivity commission the GST formula fails to recognise the “vastly divergent circumstances” between privileged city dwellers and those living in extremely needy remote communities.

“Illiterate welfare-dependent families living in humpies in Papunya clearly should rate higher than a double-income, university-educated family living in their own home in Parramatta,” Yothu Yindi Foundation chief executive Denise Bowden said.

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