Australian policy has been motivated by paternalism towards Indigenous peoples for the better part of Australia's colonial history. Contemporary forms of income management that disproportionately affect Indigenous peoples extend a paternalistic approach. The paternalism embedded within the income management discourse draws heavily upon the framework of 'new paternalism', which increases government supervision of those who receive welfare payments. However, in recent years, another form of paternalism has also been growing in popularity with Western governments - 'nudge paternalism' - which may have future implications for policy-making in the welfare context in Australia. This article comprises three parts. The first part explores specific problems that can arise with paternalistic policy-making directed towards Indigenous peoples, including nudge paternalism. The second part considers how income management departs from the principles of nudge paternalism, and the impact that income management has on Indigenous peoples. The final part explores some alternative suggestions for policy initiatives to address disadvantage experienced by Indigenous welfare recipients, particularly those living in the Northern Territory.