Prime Minister Scott Morrison is standing by embattled Energy Minister Angus Taylor after NSW Police confirmed it is investigating whether he was involved in the creation of an alleged fraudulent document used to attack the spending of City of Sydney Council.

Police confirmed in a statement a special strike force has been formed to investigate the creation of a document relating to the attack on Sydney lord mayor Clover Moore, sparking demands from Opposition Leader Anthony Albanese for Mr Taylor to immediately step down.

Mr Morrison rejected calls to stand Mr Taylor aside, telling Federal Parliament he had spoken with NSW Police Commissioner Mick Fuller who told him the "nature and substance" of inquiries were based solely on the allegations referred to them last month by shadow attorney-general Mark Dreyfus.

"Based on the information provided to me by the commissioner, I consider there is no action required by me," Mr Morrison said.