David Barker has been replaced as the party’s candidate for the safe Labor seat of Chifley in Sydney’s west.
Liberal Party state director Mark Neeham said Mr Barker had not conducted himself in a way the party expected of its candidates for the August 21 election.
Opposition Leader Tony Abbott endorsed the party’s decision, saying of Mr Barker “he’s gone, he’s finished”.
Mr Barker has been replaced by Venus Priest, a small business owner and former nurse who immigrated to Australia from the Philippines in 1995.
Mr Barker, who calls himself a “man of strong Christian faith”, reportedly used his Facebook site to accuse Labor of moving the nation closer to being a Muslim country.
He said he would claim the seat of Chifley “as mine”.
“When I get in I will give my votes, all of them, to God who is on the side of the Liberal Right.”
Mr Barker, in a letter to local Christian leaders seeking their support, pointed out Ms Gillard was an “atheist” and that his Labor opponent in Chifley, Ed Husic, was a Muslim.
A defiant Mr Barker told the ABC there should not be a Muslim in parliament.
“I’m not anti-Muslim. I believe every one should have their own beliefs,” he said.
“But I don’t know if we want at this stage in Australian politics a Muslim in the parliament and an atheist running the government.”
Mr Barker said he does not understand why he been disendorsed as the Liberal candidate for Chifley.
“I made a comment that I believe God is the only way to heaven and we shouldn’t have a Muslim candidate running in that area,” he said.
“I don’t believe that’s exactly in line with what we believe as Australians.”
Mr Barker said he is a Christian but is not against Muslims.
“I’m not attacking them on the basis of their faith, I’m attacking them on the basis of their ideology,” he said.
But Mr Abbott said attacks on people, based on their religion, had no place “whatsoever” in the election campaign.
“They will not made by me,” he told reporters in Canberra.