Australia charges a federal tax of about A$1.50 (US$1.07) on each individual cigarette to discourage smoking. As a result, a pack of cigarettes can cost more than A$60, with high prices blamed in part for fuelling a rise in illegal tobacco products.
The Victorian government said the new laws, if passed, would allow police and the state's tobacco licensing regulator to issue closure notices and seek court orders to shut businesses for longer periods.
Businesses that fail to comply with the orders could face fines exceeding A$2.4 million and up to 20 years of jail time.
"If you are selling illicit tobacco in Victoria, we are closing the door on your business," said Enver Erdogan, the minister for casino, gaming and liquor regulation.
"The illicit tobacco trade puts Victorians in harm’s way. It funds organised crime and requires a coordinated effort across borders to stamp it out."
