While Australia scored four tries to New Zealand's three (two from Kayla McAlister and one by Portia Woodman), to take the match 24-17, video replays of their first try suggested the ball was lost forward on the line.
New Zealand scored first, with McAlister crossing the line to put her team 5-0 up in the first five minutes of the game, but Australia evened the score with Emma Tonegato touched down for the favourites. Though the try was granted it appeared Tonegato lost the ball forward on the line.
When New Zealand's Woodman was given a yellow card shortly before half-time for intentionally knocking the ball down, Australia's Evania Pelite capitalised with a try on the stroke of half time to take a 10-5 lead into the break.
The Australians extended their lead to 17-5 shortly after the break, and mistakes from New Zealand on defence gave them the chance to ease in for their fourth try.
New Zealand scored twice in the final few minutes but it was too late for gold.
The New Zealanders had gone into the final on the back of an emphatic win over Great Britain 25-7 in this morning's semi, scoring three tries to their opponents' one in the first half and crossing the line twice more in the second to secure the win. The strong performance included a hat trick of tries for Woodman.
But the team faced a tough challenge in the gold medal match; they hadn't beaten Australia since February 2015.
Earlier, Canada took out the bronze medal with a 33-10 win over Great Britain.