Labor leader Bill Shorten will be investigated over a donation of union funds he allegedly made to activist group GetUp! while in charge of the Australian Workers Union.
But his deputy has dismissed the move as another sign of hysteria from the Turnbull government.
Employment Minister Michaelia Cash has referred the issue to the Registered Organisations Commission after she seized on reports the AWU gave about $100,000 to the left-wing advocacy group when it was launched in 2005
Mr Shorten was also one of GetUp's original board members.
Deputy Labor leader Tanya Plibersek dismissed the decision as a deliberate distraction to the government's woes, given the cloud hanging over Deputy Prime Minister Barnaby Joyce.
"I'm not at all concerned. I think we'll see increasing hysteria from the government," she told reporters in Canberra on Wednesday.
A spokesman for the Labor leader told The Australian support for GetUp! was endorsed by the union's national executive.
At least five members of the executive at the time recalled Mr Shorten raising the matter, but they had no memory of any formal approval.
Senator Cash wants to confirm whether the donation was properly authorised and in accordance with the union's rules.
"Their failure to provide this information strongly suggests that they have something to hide," she said.
Senator Cash says the commission has the power to obtain the information.
Liberal colleague Eric Abetz, a former employment minister, has also made his own referral.
"The potential misuse of AWU members' money to establish the left-wing front known as GetUp! is a very serious matter," he said.
