Victorian inspectors and police would be empowered to immediately issue closure Âorders of up to 90 days to stores caught selling illegal tobacco, the state Labor government announced on Sunday.
Under legislation to be introduced to parliament in 2026, courts would be able to impose indefinite closures and inspectors empowered to destroy seized illicit tobacco pre-trial.
Landlords would also be able to terminate leases on their own accord and face penalties for knowingly leasing their shops to dodgy operators.
Casino, Gaming and Liquor Regulation Minister Enver Erdogan said the proposed laws would be an additional tool to crack down on the illegal tobacco market.
"We accept this is not the silver bullet," he told reporters.
"There are multiple factors for the growth of the illicit trade but this will mean there are more powers to take efficient action."
Tobacco was unregulated in Victoria until enforcement began on a licensing scheme in February.
Victoria's 14 tobacco licensing inspectors uncovered a "high level" of non-compliance after visiting 49 stores in the first month of enforcement.
More than $5 million of illegal tobacco products were seized, including 3.19 million cigarettes.
Victoria has monitored the introduction of similar closure laws across the country and its model would be tougher than any other jurisdiction, Mr Erdogan said.
Almost 200 illegal tobacco shops in Queensland were temporarily closed in a 10-day blitz after similar laws came into operation in November.
IGA Ritchies chief executive Fred Harrison conceded he wished Victoria had acted sooner but said legal tobacco sales had since rebounded at its Queensland stores.
"There's been too many undesirables in this tobacco industry," he said.
The Australian Association of Convenience Stores said the model had worked in Queensland, NSW and South Australia.
But states and territories were doing the heavy lifting with little support from the federal government, the association's chief executive Theo Foukkare said.
"The only real way to tackle this issue head on and starve the illegal market demand is to reduce the excise on regulated, legal tobacco," he said.
"This is a federal government failure on all fronts."
The federal tobacco excise has leapt to $1.50 a cigarette, prompting many of the nation's 1.7 million daily smokers to turn to cheaper options on the booming black market.
A tripling in the excise rate over the past decade has pushed the average price of a pack of legal cigarettes towards $50, while a black market equivalent can cost less than $15.
It has led to 200 fire bombings, at least three murders and countless acts of intimidation and extortion, according to the Australian Criminal Intelligence Commission.
The proposed Victorian laws were an admission the state government botched its initial response to the crisis, Liberal Party Deputy Leader David Southwick said.
"Why has it taken this government so long to act," he said.
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