Luke Gosling, who represents the federal Darwin-based seat of Solomon, has been charged with two counts of assault against NT Administrator David Connolly following an incident in July.
The 54-year-old Labor MP, who attended the Garma Festival on Saturday, denies the allegations and has vowed to fight them in court.
The incident reportedly occurred at the NT Thailand Grand Festival in Darwin on July 18, with Gosling posting photos from the event on social media that day.
He is the government's special envoy for defence, veterans affairs and northern Australia.
Health Minister Mark Butler on Sunday justified the backbencher retaining the role after days of opposition pressure for Gosling to be stood down pending a court outcome.
"If he were a minister, he would be required to stand aside, but the special envoy is a very different position," Mr Butler told News24.
"The system is very clear: as a member of parliament, you're not required to stand down … if you're charged.
"Obviously, there are some provisions around conviction, but he is really just a backbench member of parliament."
Australia's legal system relied on a presumption of innocence and politicians should treat Gosling in the same way, Mr Butler said.
Other senior Labor figures have refused to comment publicly on the case since Gosling was charged on Thursday, saying it was a matter for the backbencher to discuss with Prime Minister Anthony Albanese, who is on leave.
But the coalition has accused the government of hypocrisy after previous Labor calls for MPs to be stood down while under investigation.
"This is a pretty serious charge that has been laid," deputy Liberal leader Jane Hume told ABC's Insiders program.
"Anthony Albanese has been very quick to condemn other people and request, in previous lives, that prime ministers stand down their ministers for far less."
Ms Hume questioned why Gosling had been appointed a special envoy if the position did not carry any weight, as Mr Butler had suggested.
"If Anthony Albanese was consistent, if he was a man of genuine integrity as he claims to be, he would stand Luke Gosling down," the coalition frontbencher said.
Gosling is banned from going within 50 metres of the NT's Government House building and must give the administrator's office 48 hours' notice before attending any event where the two men would be present as part of his bail conditions.
If they are at an event together, the Labor MP must not be within 15 metres of Mr Connolly.
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