A trial has been launched for a cashless welfare card in one South Australian town, which community leaders say will save lives.

The card restricts 80 per cent of the payment for welfare recipients so they cannot spend it on alcohol or gambling, while rest is provided as cash.

Limits will apply to all recipients of “working age payments” in the region, while pensioners can join the scheme on a volunteer basis.

Welfare recipients can access a higher percentage of cash if they meet criteria including improved school attendance by their kids.

The Federal Government has signed a Memorandum of Understanding with the Ceduna council and five Indigenous organisations to start the trial early next year, but the Coalition still needs to get legislation underpinning the program through Parliament.

“For far too long, members of our community have been dying,” Ceduna Aboriginal Corporation chief executive Mick Haynes told reporters this week.

“There's alcohol-fuelled violence, domestic violence and people have been misusing their money. The community discussed all these issues and thought we need to change things for the better.”

Ceduna mayor Allan Suter has backed the scheme too.

“The principal concern we were trying to address was the very sad situation where a very small minority of people are spending the bulk of the benefits that they receive on the purchase of alcohol or gambling services,” he said.

“We're hoping this will be one of a series of steps taken to break the cycle.”

If the program goes ahead, restrictions will be imposed on those living in Ceduna and a large regional area stretching almost 480 kilometres to the West Australian border, and north to the boundary with the APY lands.

The Greens remain opposed the card, with spokesperson Rachel Siewert saying such punitive measures do not address the actual reasons for alcohol and gambling addiction.

“It will fail and people will be unnecessarily penalised,” she told the ABC.

“It implies everyone is mismanaging their money. Drugs and alcohol and gambling are symptoms of a large number of other problems.

“People who are addicted will go and find these things elsewhere.”

The Federal Government says it plans to roll out assistance measures to the community, which deal with drug and alcohol dependency, financial counselling, early childhood education and community safety.

“In a community like Ceduna, unfortunately, they've got a hospitalisation rate from assault which is 68 times the national average, much of which is due to alcohol abuse,” Parliamentary secretary to the Prime Minister Alan Tudge said.

“Last year they had 4,500 admissions to the sobering up centre from a small community of just 4,000 people.”