Labor MP Marion Scrymgour says she will commence legal action against Lidia Thorpe, over allegations the independent senator made in a Senate estimates hearing and later shared on social media via a video of the session.

It comes after Ms Scrymgour, the federal member for Lingiari, was the subject of questions by Senator Thorpe during Senate Estimates, alleging Ms Scrymgour had misappropriated pandemic stimulus payments while serving as the chief executive of the Northern Land Council (NLC).

Senator Thorpe asked a current NLC executive if a $400,000 grant paid by the land council to a remote Aboriginal corporation was to "build a holiday house Ms Scrymgour's family at Twin Hill Station", before also accusing the MP of using the pandemic stimulus payments for political campaigning purposes.

"Someone at [the] NLC had to have a word to Ms Scrymgour about not using the COVID stimulus money to further her political aspirations," Senator Thorpe said during senate estimates.

On Monday, the ABC reported Ms Scrymgour, whose mother is Tiwi, and father a Stolen Generations Anmatjere man, denied the accusations.

She has taken on legal representation from Arthur Moses SC and said the accusations by Senator Thorpe damaged her reputation, as well as exposing her to racism and threats against her family.

"I take these allegations very seriously — they are offensive, and they need to be dealt with," Ms Scrymgour told the ABC.

"They are slurs on my character.

"I take great offence at this, and I will deal with Senator Thorpe through the appropriate channels that are open to me, and that is, I have put it in the hands of lawyers, and they will deal with it."

While Senator Thorpe made the statements under parliamentary privilege, she later tweeted the video of the estimates with further commentary, which Ms Scrymgour argued means the senator "forgoes her parliamentary privilege".

"Senator Thorpe doesn't respect the institution of parliament and what it stands for, but she is happy to use it to attack people she sees as her political opponents, especially when they are other First Nations women," Ms Scrymgour said shortly after question time on Monday.

Senator Thorpe, a Gunnai, Gunditjmara and Djab Wurrung woman from Victoria, said her questions in senate estimates were based on community concerns about the use of public money.

"Budget estimates is a time to scrutinise the administration of public money and adherence to good governance," she told National Indigenous Times.

"My questions in Estimates this month were guided by community concerns. Pushing for better accountability and transparency around government spending is a key part of my role as an independent Senator."

During the senate hearings in June, the NLC said they would investigate allegations of misuse involving pandemic payments within the land council.

It has never mentioned any investigation involving alleged actions of Ms Scrymgour.