The world's toughest laws on tobacco promotion moved a step closer on Thursday with Australia saying all cigarette packets will need to be plastered with graphic health warnings and a bland olive-green.

Under proposed legislation aimed at reducing smoking rates, due to take effect next year, all logos will be removed from cigarette packaging, and tobacco companies must print their brand name in a specific font.

Olive-green was picked after research showed it was the least attractive colour for smokers, in a bid to prevent tobacco companies trying to market their products by making them look luxurious or cool, the health minister said.

As well as the colour, Australia plans to have graphic health warnings with images such as black, diseased gums, blinded eyes and children in hospital cover 75 per cent of the front of a pack and all of the back.

"The new packs have been designed to have the lowest appeal to smokers and to make clear the terrible effects that smoking can have on your health," said Health Minister Nicola Roxon in releasing the new designs.

"The legislation will restrict tobacco industry logos, brand imagery, colours and promotional text appearing on packs.

"The only thing to distinguish one brand from another will be the brand and product name in a standard colour, standard position and standard font size and style."

Roxon said 15,000 Australians die of smoking-related diseases every year, and that tobacco use cost the country Aus$31.5 billion ($32.9 billion) a year in healthcare and lost productivity.

Though Australia would be the first country in the world to mandate plain packaging of cigarettes, New Zealand, Canada and Britain have considered a similar policy.

The move has infuriated tobacco companies, with Imperial Tobacco Australia already saying it planned to challenge plain packaging on the grounds that it would impact profits.

British American Tobacco Australia, meanwhile, said on Thursday that the proposed legislation, which still needs to be approved by parliament, would infringe international trademark and intellectual property laws.

Roxon said the government was not scared by legal threats.

"The government knows that big tobacco companies are going to fight this," she said.

"But when you still have 15,000 Australians dying every year because of tobacco-related illnesses caused from smoking, this is a fight it's worth us having.

"We believe we are on very strong legal grounds," she added.

"We're not going to have 'big tobacco' scaring us with legal action. We want to make sure that the glamour that might have been attached to smoking in the past is dead and gone."

British American Tobacco Australia, whose brands include Winfield, Dunhill and Benson and Hedges, said there was no proof plain packaging worked, and warned that taxpayers could face footing billions in legal fees.

"What company would stand for having its brands, which are worth billions, taken away from them?" said BATA spokesman Scott McIntyre.

"A large brewing company or fast food chain certainly wouldn't and we're no different.

"The government could end up wasting millions of taxpayer’s dollars in legal fees trying to defend their decision, let alone the potential to pay billions to the tobacco industry for taking away our intellectual property."