An email has been sent to hundreds of individuals and organisations falsely claiming independent candidate for Wentworth Dr Kerryn Phelps pulled out of the race because she has HIV.
The email was reportedly sent from a fake address on Sunday and urged people to vote for Liberal candidate Dave Sharma, according to the ABC.
The Liberal Party has condemned the smear, saying it is not behind the email.
"The Liberal Party's Wentworth campaign had absolutely no involvement in the sending of this e-mail. We condemn vile personal smears of this nature," it said on Twitter.
Ms Phelps told the ABC the email was "shocking and disturbing".
"When I went into this campaign people warned me that there would be dirty tricks, but this is next level," she said.
Internal Liberal Party polling shows Wentworth could fall to the independent candidate in this weekend's by-election.
Ms Phelps is leading Mr Sharma with 55 per cent to 45 per cent of the two-party preferred vote in the Sydney eastern suburbs electorate.
Mr Turnbull, who lost his job as prime minister in August, held the seat with a two-party majority of almost 18 per cent.
The polling, published in The Australian, is bad news for Prime Minister Scott Morrison whose coalition holds government with a one-seat majority.
Additional reporting: AAP
