The federal government's tax plans risk being squeezed further with rebellious Coalition backbenchers shifting their sights to superannuation.
As Prime Minister Malcolm Turnbull and Treasurer Scott Morrison noticeably softened their language over changing negative gearing following a growing revolt, the same group of backbenchers is now warning it will not countenance reducing the annual cap of $30,000 under which contributions receive concessional tax treatment.
Instead, it wants the government to adopt a model proposed by Access Economics in which a person's contributions tax rate would be their top marginal tax rate minus 15 per cent. It is believed the government has already considered this option but rejected it in favour of lowering the annual concessional cap to $20,000.
"We think that the number should be increased, not decreased," said one member of the ginger group.
Another called it "just daft".
"We're already limiting people's ability to save for their future," he said.
Queensland LNP MP Luke Howarth said he was more concerned about changes to taxes on super and said he would prefer to see a lifetime cap.
"If they're saying 'oh well everyone can salary sacrifice $600,000 over a lifetime or $1 million or whatever the figure is', I'd prefer them to do that because then if you need to put a whole lot in at the end of your working career you can or you want to put a bit away each time you can as well," he said.
Since rejecting plans to fund income tax cuts by raising the rate and base of the GST, the government has been looking at making savings from negative gearing, superannuation and trading away tax deductions.
Mr Morrison, who met privately with a backbench committee on Monday to discuss concerns, has spoken frequently about targeting investors with multiple properties, or what he calls the "excesses" of negative gearing, and the government is looking at capping at about $20,000 the annual tax deduction that can be claimed from negative gearing. The cap would have to be applied retrospectively to make any money.
The backbenchers oppose it on philosophical grounds and believe it will muddy the attacks against Labor's policy which would limit negative gearing to new homes after July 1, 2017.
One senior MP said Mr Morrison and Mr Turnbull should dump their plans now because "they won't get it through the party room".
"No backbenchers support it," he said.
There was considerable anger from senior levels of the party towards former prime minister John Howard after he warned on the weekend against touching negative gearing and said the government should look again at the GST.
One senior source noted Mr Howard's greatest economic challenge in government was how to spend all the money from the mining boom and now Mr Turnbull and Mr Morrison were trying to deal with the "enormous welfare state" which was the Howard legacy.
In Parliament on Monday, Mr Turnbull and Mr Morrison refused to answer questions about their negative gearing plans, focussing instead on Labor's policy which Mr Turnbull claimed would "undermine our transition to the new economy".
Mr Morrison said: "We don't believe it's excessive that policemen, nurses, paramedics school and teachers and some two-thirds who have a taxable income of $80,000 or less invest in negative gearing. We don't think that's excessive but those opposite do."
In the Senate, Attorney-General George Brandis cast further doubt on the government touching negative gearing when he said the Coalition was opposed on an in-principle basis to retrospectivity.
To calm the backbench, Mr Turnbull and Mr Morrison tempered their public statements on negative gearing, saying everything was being considered "very carefully". This softening of tone was perceived by MPs as the government leaving itself the option of leaving negative gearing alone.
Labor said the government's tax plans were clearly in chaos.
John Daley, chief executive of the Grattan Institute, said a $20,000 negative gearing cap would affect about 138,000 taxpayers and generate $1 billion a year in extra revenue.
He estimated that for someone to be generating a negative gearing loss of $20,000, they'd need to be sitting on around $2 million of property.
"It's tough to imagine people with $2 million in property are on the breadline," he said.
A $50,000 cap would hit 18,000 taxpayers, but generate only $300,000 a year which he said was "milkshake territory".
Mr Morrison scoffed at economic modelling produced by News Ltd which showed a $20,000 cap would raise less than $100 million a year.
"I hope the Daily Telegraph didn't pay too much for that advice," he said.
With speculation rife that Mr Turnbull could call an election for July 2, or even earlier, he started honing his pitch on Monday.
"The central issue this year, this election year is going to be who is best able to lead Australia in this transition from the mining construction boom to the new economy?" he said.
-with Primrose Riordan