Prime Minister Scott Morrison's decision to take a proposal for a religious discrimination act to the next election is quietly dividing his colleagues, with some fearing it could further alienate small "l" liberal voters who are fatigued by this debate.

There is despair from some MPs who say with the federal election so close and the Government so on the nose with voters, the last thing they need is a polarising and divisive debate about religious freedom.

Their fear is as much with the symbolism as with the proposal itself.

But that's not the whole story.

Conservatives who have long argued that legalising same-sex marriage would limit their rights to adhere to their faith are relieved the PM is prepared to strengthen rights they fear are under growing attack by changes in law and social norms.

The key question is whether the changes outlined today by Mr Morrison will satisfy them at a time when another internal argument is the last thing needed.

Thursday's announcement was the unfinished business from the same-sex marriage plebiscite and subsequent legislation.

Former Liberal MP Philip Ruddock was commissioned to review the nation's religious freedom protections. ( ABC News: Marco Catalano )

Unintended consequences to review delay

In an attempt to ensure the marriage equality laws were enshrined by Christmas last year, former PM Malcolm Turnbull kicked the can down the road by commissioning the Ruddock review into religious freedoms to appease concerns among his conservative colleagues that same-sex marriage would effectively erode the rights of religious institutions.

The failure to release the Ruddock review until this late in the year has had several unintended consequences, especially after it was leaked during the contentious Wentworth by-election.

That leaking sparked the debate about protections for gay students and teachers in religious schools and the promise by Mr Morrison to act to end the discrimination against students.

The Government will now refer that to the Australian Law Reform Commission for review due to the impasse over how to resolve tension between the rights of religious schools and the rights of LGBTI students.

The Government has also promised a religious freedom commissioner will be appointed to the Australian Human Rights Commission to handle religious discrimination complaints.

This idea was not recommended by the Ruddock review, and several Liberal MPs told the ABC it is unnecessary and excessive.

While the government has made comparisons with the original Racial Discrimination Act, it was established to address a pattern of racist laws and reflected a public change in attitudes. This is equally the same with the Sex Discrimination Act. All these Acts were created as public attitudes changed.

Sceptical Liberal MPs believe there is not a similar established pattern of religious discrimination that has been established.

Morrison wants this to hinge on diversity

The Prime Minister's language when announcing this new policy was precise and targeted — he was keen to argue it was central to Australia's multicultural identity.

Mr Morrison pointed out that religious belief is higher among some migrant groups.

"If you support a multicultural Australia, you'll be a supporter of religious freedoms. You'll understand that religious faith is synonymous with so many different ethnic cultures in Australia," Mr Morrison said.

That framing is important because it is an open challenge to Labor.

The high proportion of people who voted no in the same-sex marriage plebiscite in Labor-held seats in western Sydney highlights the political challenge for the party here.

There were 17 no-voting electorates, and 12 were in western Sydney with nine of those held by Labor MPs.

The multicultural pitch is key here.

Rather than be painted as being centred around protecting white Christians the Prime Minister is keen to make this issue about national diversity.

Tim Soutphommasane said the Government's concern about racial discrimination was hard to believe.

It did not take long before former race discrimination commissioner Tim Soutphommasane raised the Government's previous attempts to change the Racial Discrimination Act to point to its inconsistent message on protections for ethnic minorities.

"If the Federal Government is so concerned about protections against discrimination, why did it push so hard — twice — to weaken the Racial Discrimination Act?

"Hard to take it seriously when it sought to license open racial bigotry and discrimination in the name of 'free speech'."

Liberal MPs say this critique is unfair because the religious act proposed by Mr Morrison would not include speech limits but simply increase protections for religious belief.

Will religion become a political football?

Labor has been careful and strategic in its response so far to this proposal, avoiding rebuking the idea and instead arguing for urgency around the protection of gay students.

Labor will not oppose the concept of a religious freedom act per se but strategists say the devil will be in the detail.

The Prime Minister says he is "looking to legislate before the election" and called on Labor to support the bill.

But with so few sitting weeks before a potential May election, it is hard to believe this will be a straightforward legislative transaction.

The major party's failure to resolve the gay students discrimination issue is an indication of just how fraught it can be to legislate in Canberra.

Opposition Leader Bill Shorten says he is open to the idea of a new act but is concerned that certain members of the Coalition want to make religion a political football at the next election.

He says that protecting religious freedom is Labor party policy but added he "could not say that religion is in the top 100 issues that are raised with me".

He warned against the issue being weaponised for "partisan advantage".

The question now is whether this will be settled bipartisan policy or a partisan debate fought out in an ugly political campaign.