The allegation, raised by former federal MP Russell Matheson in a complaint to Liberal officials on Friday, threatens to destabilise the party and prompt an investigation into state MP and powerbroker Jai Rowell.

Mr Rowell, the MP for Wollondilly, vehemently denies the allegations as the fabrications of troublemakers and says he was a strong supporter of Mr Matheson's.

Suspicions that Mr Matheson's campaign to hold the key western Sydney marginal seat of Macarthur was being undermined by leaks emerged early in the federal campaign.

Prime Minister Malcolm Turnbull's office planned to strike early in the two-month campaign with a $30 million upgrade of an unsafe stretch of road, the Appin Way running through Macarthur.

But they were stunned when a local journalist mentioned that Labor infrastructure spokesman Anthony Albanese and Bill Shorten were on their way to Appin the day before.

Labor gazumped the government with plans for a $50 million upgrade, announced roadside.

"We were sitting there going, 'how the f—k did they find out?'," a senior Liberal campaign source said. "We were shattered … and we needed $20 million."

The Prime Minister cancelled his appearance and was forced to make a rushed, matching announcement during an appearance the next morning against the ill-fitting backdrop of a western Sydney tank manufacturing plant.

A senior Labor source has told Fairfax Media they understood the ALP's Macarthur campaign had benefited from leaked Liberal plans.

But in a leaked confidential letter sent on Friday, Mr Matheson passes on allegations of a "grievous betrayal" to the party's most senior officials.

Mr Rowell was removed as manager of the Macarthur campaign before the mid-May announcement and his wife, Belinda, worked in the campaign office.

"It is being [alleged] that Jai Rowell leaked confidential information to Labor to destroy my election campaign," Mr Matheson wrote. "It goes without saying that conduct of this nature strikes at the heart of the principles and standing of the Liberal Party and its objectives.

"It is with deep regret that I have to advise you of these matters."

Mr Matheson, who is about to take up a plum post-politics job on the Administrative Appeals Tribunal, declined to comment.

But Fairfax Media understands his complaint came after he and a staff member were told by a Labor MP and campaign staffer months later that Mr Rowell had clandestine meetings with Labor during the campaign.

Mr Rowell denied meeting or providing information to Labor or that his wife knew of the announcement.

"Definitely not," he said. "I'm a big supporter of Russell's, this is just a couple of people trying to make trouble.

"There's one or two people trying to take my seat."

Liberal officials will now be required to investigate the allegations; working against the party carries penalties of up to 10 years' suspension.

Labor claimed Macarthur with a large swing in a broader sweep of western Sydney.  

Relations between the two former close friends are understood to have soured after Mr Matheson declined to carry out a plan to unseat another Liberal MP, Angus Taylor, in the neighbouring seat of Hume.

Several MPs identified Mr Rowell as behind a plan to shift Mr Matheson to the safer seat using his control of local branches. But Mr Matheson scotched the idea after the intervention of the Prime Minister.

Mr Rowell's control over preselections have previously "infuriated" Premier Mike Baird.

He was dumped from cabinet after he moved against the Premier's preferred candidate for the NSW upper house at the last state election, Vietnamese businesswoman Dai Le.