The Belco Party is acting as a front for the Liberal party in the northern seat of Ginninderra, Chief Minister Andrew Barr says.
Former Liberal leader Bill Stefaniak is the founder of the new party, which is aiming to win a seat in Belconnen.
On the campaign trail on Tuesday, Mr Barr claimed Liberal party staffers were working behind the scenes in the party.
But he was confident a Belco Party win would come at the expense of the Liberals, not Labor.
"There is a vacant seat with Vicki Dunne's retirement and Belco Party are in the running to win that vacant seat," he said.
"It's a seat currently held by the Liberal Party."
But Mr Stefaniak said Mr Barr's comments showed how out of touch he was.
"I think on the figures, it's almost impossible that the Liberals would lose a seat," he said.
"It's between us and the Greens for the third seat."
Mr Stefaniak maintained no deals had been done with the Liberals.
While he would like to see a change of government, he said he would be open to forming government with Labor if there were sticking points with the Liberals.
He said the party was hopeful of picking up the fifth seat in Ginninderra, but recognised it would be a tough ask.
The ACT Legislative Assembly worked better when there were good independents in the chamber, he said.
"People are absolutely sick and tired of the current government," he said.