Cigarettes will have to be sold under plain, logo-free wrappers in Australia under a new law put forward today.

The ban would take effect from July 2012 and packets would have a compulsory prominent government health warning with the brand name relegated to tiny, generic print at the bottom.

"The new branding for cigarettes will be the most hardline regime in the world and cigarette companies will hate it," Prime Minister Kevin Rudd said.

The government also announced it would increase the cigarette tax by 25%, driving up the price of a packet of 30 cigarettes by about 2.16 Australian dollars (£1.30).

Tobacco companies immediately criticised the move and vowed to fight it in court.

"Introducing plain packaging just takes away the ability of a consumer to identify our brand from another brand and that's of value to us," an Imperial Tobacco Australia spokeswoman said, adding the company plans to take legal action.

Retailers said the tax rise would hurt their businesses and bolster the cigarette black market.

"It's a lazy policy response being pushed by some health advocates," Mick Daly, National Chairman of Australian supermarket chain IGA, said.

"That amounts to a direct attack on approximately 16% of Australians who have made legal and legitimate lifestyle choices."

Tim Wilson, director of intellectual property and free trade at Australia's Institute of Public Affairs, said tobacco companies will probably demand compensation over the forced packaging changes.

"Under Australia's constitution, if the government basically takes someone's property rights including intellectual property such as trademarks, or devalues them to a significant extent, they have to provide compensation," he said. "I'd be shocked if they didn't (pursue compensation), because if it happens here, it'll happen all over the world."