In 1912 Palm Island become a Holiday Resort for tourist, there were two resort situated on the Island, at Butler Vale (now known as Butler Bay), and Casement, (old Catholic School Grounds).
Palm Island was gazetted as an Aboriginal reserve in 1914; Chief Protector J.W. Bleakley designated a specific role to Palm Island as ‘a penitentiary for troublesome cases’. The establishment of Palm Island was part of a wider, national attempt to control the locals by taking control of all aspects of Aboriginal lives at a time now known as the "Protection Era". In every state and territory, laws were passed governing where Aboriginal and Torres Strait Islander people could live.
Representatives from over 40 tribes were displaced and sent to Palm Island for a variety of reasons including it being used a prison camp for troublemakers at other locations and the destruction of the Hull River Mission at Tully. More than forty different language groups were sent to Palm, locating their camps in areas to mirror their positions on the mainland. The enforcement of so many tribes living in one place has generally been cited as a major cause of unrest on Palm over the years.
Palm became exile and punishment for Aboriginal and Torres Strait Islander people who disobeyed these strict laws, or refused to comply with Government policy. During this time people worked for rations and not wages.
The Island’s first superintendent, Robert Henry Curry, a returned serviceman, set about establishing control and instructed residents to clear the land, housing himself in a tent on the beach, White residents, schoolteachers, storekeepers, and other staff were housed in ‘the white’ section, in homes built by Aboriginal residents. Following construction of Mango Avenue by the Hull River people, it was subsequently declared ‘out of bounds’ to all who were not white, with gates barring access at each end of the road.