Under the new bill, tabled on Wednesday, a child's safety would be the main concern in considering whether to remove them from their family, giving case workers more power to remove vulnerable children, NT Child Protection Minister Robyn Cahill said.
A child's ethnic or cultural background would not be a valid reason to leave them in an unsafe situation.
Ms Cahill said the Care and Protection of Children Amendment Bill had been worked on for more than a year and aimed to strengthen parental accountability and earlier intervention for at-risk children.
But the NT government was portraying Aboriginal families, communities and culture as risks to child safety, Aboriginal Peak Organisations Northern Territory chair Theresa Roe said.
Many studies showed culture and connection to Country were protective factors for children, she said.
About 90 per cent of children in out-of-home care in the NT were Aboriginal but only 16.7 per cent were placed with relatives or kin, the lowest rate of kinship placement in Australia.
"Lowering the threshold for child removal and fast-tracking long-term placements will deepen an already devastating crisis, with consequences for generations of Aboriginal Territorians," Ms Roe said.
The legal shake-up comes as the NT government announces former NSW police commissioner Karen Webb will co-lead an independent review into the conduct of child protection workers in the case of Kumanjayi Little Baby, alongside longtime public sector official Greg Shanahan.
Five-year-old Kumanjayi Little Baby, a name used in line with cultural traditions, was allegedly murdered at a town camp near Alice Springs on Anzac Day.
Jefferson Lewis, 47, has been charged with her murder.
Three NT child protection workers have been suspended in connection with the case.
Under the proposed reforms, the Department of Children and Families would be required to take steps to reunify children with their families while keeping safety at the forefront of risk assessments.
"Where it is safe to do so we want children with their families, but where it is not we will act decisively to give children the permanency, stability and care they deserve," Ms Cahill said.
When asked if the reforms would create another "stolen generation", Ms Cahill said officials feared being accused of that but she would not be "a minister who abandons yet another generation of territory kids".
"There's a huge amount of work that's been done to see how we can support families when things aren't going as well as they should be ... how we can prevent the need to remove a child."
But Ms Roe said if the NT government was serious about child safety, it must invest in adequate housing, family violence responses, mental health and alcohol and drug support.
Rob McPhee, chair of the Aboriginal Medical Services Alliance Northern Territory, said the amendments in the legislation would allow courts to override the Aboriginal Child Placement Principle, a national framework that emphasises placing Indigenous children with their kin or community.
He said the framework existed "because history has shown the devastating harm caused when Aboriginal children are disconnected from family, culture and community".
"The answer is to properly resource and support families, kinship carers and Aboriginal community-controlled organisations so children can remain safe, connected and supported."
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