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The Coalition is split over whether to cut capital gains tax concessions for property investors, prompting Prime Minister Malcolm Turnbull to douse expectations any change will be adopted.
While sources insisted the process to develop a policy as part of the Coalition's housing affordability push was still alive, Mr Turnbull, under pressure, sided at the end of the day with his Finance Minister Mathias Cormann, who had moved swiftly earlier to kill off the idea.
"The government has no intention or plan to change capital gains tax or negative gearing. That has been our position, is our position," the Prime Minister told Parliament after being asked for a fifth time by Labor.
In response to the previous four questions from Labor as to whether a CGT change was on the cards, Mr Turnbull sidestepped.
In Parliament, Treasurer Scott Morrison left open the possibility for change, by saying the only party with a policy to increase capital gains tax was Labor. Last year, Mr Morrison had flagged changes to curb the "excesses" of negative gearing but lost the internal argument to more conservative colleagues including Senator Cormann.
The Australian Financial Review reported on Thursday that the government was working on policy options to curb the 50 per cent capital gains tax concession which applies to investors who have held an asset for a minimum of 12 months.
It was as part of a housing affordability policy being developed for the May budget. As a spin-off, any revenue gained from a change would help fill the hole to be created by the imminent dumping of up to $13.2 billion in budget cuts.
The cuts to welfare and higher education have dogged the Coalition since many of them were included in Tony Abbott's infamous 2014 budget. Any measures unpassed when Parliament rises at the end of March ahead of the May budget will be jettisoned.
"We're getting rid of the lot," a senior source confirmed on Thursday, adding that it would sever the final link with the politically unpopular aspects of the Abbott government.
But that will create a revenue hole.
Mr Morrison repeated his warning taxes would have to rise if the Senate blocked these budget savings, of which $6 billion are before the Senate in the form of the omnibus bill.
"I have no desire to increase taxes at all. That should not be necessary because we've got a bill in the Parliament which makes that not necessary," he said.
Under options being looked at on capital gains tax, the 50 per cent concession would be cut either along the lines of Labor's policy which is to halve it to 25 per cent, or by some other amount.
The Business Council of Australia has long advocated reducing the concession to 40 per cent, as recommended in the Henry Tax Review.
The other option under consideration is to phase in the concession, meaning a property would have to be held for several years before the full 50 per cent concession was granted.
Unlike Labor's policy, which would apply to all investments, the Coalition is looking at applying it only to property.
It has been argued internally that applying the policy to all investments, including shares, would spark another conflagration with the Liberal party base, elements of which are still fuming over the cuts to superannuation tax concessions unveiled in the 2016 budget and taken to the election.
The Coalition is not considering any changes to negative gearing, whereas Labor would restrict that to new homes for future investors.
Mr Turnbull conceded the government has had Treasury examine options on CGT but only, he said, so the government could gauge the supposed damage Labor's policy would cause.
"The government has been paying very close attention to the damage that would be caused by the capital gains tax proposals of the Labor Party, and the impact that would have on investment, on incentives," he said.
"Treasury officials look at a whole range of options, a whole range of studies , we get discussions from various parties, from various interest groups associated with the budget, and it would be remiss not to examine all of those proposals, and to pay respect to them as well.
"But the fact is that what we know is that the plan we took to the last election delivers more investment and more jobs."
Shadow treasurer Chris Bowen said the government was clearly in disarray over CGT but should it decide to adopt a change, Labor would most likely support it, even if it did not go as far as the ALP policy.
He cautioned Labor would have concerns about the distortionary effects caused by just applying change to the housing sector.
"But I certainly would look at the detail constructively because a step in the right direction of our policy would be welcome," he said.
The Property Council of Australia, which fought Labor's policy before the last election, moved quickly to kill off any change.
"Increasing capital gains tax runs the risk of reducing the incentive to invest at a time when Australia needs to build new housing to cater for our growing population," said Ken Morrison, the council's chief executive officer.
"We urge the government to be extremely cautious if it is considering changing the CGT discount.
"The CGT discount is recognition that you should not tax people for inflation – inflation driven capital growth is not real growth and investors should not be taxed for it."
Liberal MP John Alexander repeated his call that both negative gearing and CGT needed to be looked at. "We need to control investor-driven demand," he said.
Economists, the Treasury and the Reserve Bank of Australia have all contended that curbing CGT concessions would help with housing affordability.