Indigenous leader Noel Pearson has urged the Federal Government to consider a radical overhaul of Indigenous welfare.

Mr Pearson, the director of the Cape York Land Council, has handed a report to the Government calling for welfare payments to Aboriginal people to be conditional on behaviour.

Welfare recipients would be stripped of payments under the plan if their children missed school or were neglected, and if their housing was not treated with respect.

Mr Pearson says passive welfare has all but destroyed his community.

"It breaks down the will to take responsibility for one's own livelihood, to chase better opportunities and better income for your children," he said.

"It takes the vigour and vitality out of individual striving. It takes the hunger out of a search for a better life. It also is ripe for being co-opted by addictions."

He says mutual responsibility is vital to a healthy community.

"I come from a community where I've seen the effect of welfare take a strong and resilient and responsible people from a position where, had the doors of opportunity been open, I believe our people would've been sailing," he said.