Senior Sergeant Chris Hurley, now based on the Gold Coast, was yesterday placed on non-operational duties, despite a damning report by the acting state coroner into the 2004 death of Mulrunji Doomadgee.
Acting state coroner Christine Clements found Mr Doomadgee should never have been arrested and that Sgt Hurley had stuck the blows that killed him on November 19, 2004.
The 36-year-old man died on the floor of a cell in the Palm Island police station from a ruptured liver and portal vein, triggering a riot on the North Queensland island.
Community elder Alfred Clay said the healing process could be permanently damaged if Sgt Hurley was not removed from the service.
"I call it institutionalised racism," he said.
"Why are they protecting him? If it was any other organisation he'd be stood down."
Mr Clay was not sure how the decision would affect the mood of the island.
David Bulsey, who had his riot charge dropped early last year, said Sgt Hurley should be in jail.
"He should be suspended," he said. "He should be in prison."