The Victorian Liberal Party is at war over a replacement seat for cabinet minister Mary Wooldridge, with former premier Ted Baillieu demanding his federal colleagues ''stay out'' of the preselection process this time.

In another horror day for the Napthine government, Treasurer Michael O'Brien has also been forced to withdraw laws designed to rake in an extra $287 million in poker machine taxes after independent Geoff Shaw signalled he was likely to vote against it.

The backdown has left the government facing a significant hit as it prepares its final budget before the election.

Mr O'Brien confirmed that the bill had been pulled from the government's business program for the week following a report in The Age indicating the legislation was set to fail.

Labor has slammed the tax increase as a blatant revenue grab while Mr Shaw - who holds the balance of power - has warned taxes are already too high, while raising concerns about the impact on clubs in his electorate.

Mr O'Brien promised the legislation would be reintroduced in coming weeks in an unaltered form to give the government time to provide Mr Shaw with ''more information''. It remains unclear what additional information Mr Shaw may be provided with.

The embarrassing backdown represents yet another blow for the government in the Parliament, with Mr Shaw twice voting against key legislation for a parliamentary budget office and twice voting against the government's business program.

The government also continues to be buffeted by fallout from the messy preselection stoush for the plum seat of Kew that saw Ms Wooldridge, whose existing seat of Doncaster is being abolished, comprehensively defeated by former Stonnington mayor Tim Smith.

At an extraordinary party room meeting called by Premier Denis Napthine on Tuesday morning, state Liberal MPs drilled Victorian Liberal president Tony Snell for almost an hour as tensions flared over the issues of abortion and accusations of federal interference in the preselection process.

One attendee described the mood as ''very tense'', warning the party was dangerously fixated on its own divisions rather than the election and the week ahead in Parliament.

Ms Wooldridge, who is seen as a member of the left, was publicly backed by Dr Napthine, while Mr Smith was actively promoted by conservative forces within the party and federal MP Josh Frydenberg, whose federal seat overlaps.

Ms Wooldridge's backers are now canvassing a range of alternative scenarios, including the possibility that her close ally Mr Baillieu vacates his seat of Hawthorn, or that she ascends to the upper house.

The electorates of Southern Metropolitan and Eastern Metropolitan are both being considered, although each would be problematic. Ms Wooldridge is also considering her future in politics.

According to detailed notes of the meeting leaked to The Age, Mr Baillieu demanded to know whether Mr Snell would be ensuring federal MPs ''stay out of this one''.

''So you and the party will tell them that?'' Mr Baillieu asked Mr Snell.

The issue of abortion has also become a flashpoint within the party.

Upper house MP Bernie Finn angrily accused his colleagues during the meeting of falsely ''spreading rumours'' that Ms Wooldridge lost because he had been telling Liberals in Kew that she didn't support a review of abortion laws that require doctors who are conscientious objectors to abortion to refer patients to another medical practitioner.

Mr Finn told the meeting ''if people have nothing better to do than spread such untrue rumours they should retire''.