Vapes will be heavily regulated and the importation of all e-cigarettes will be strictly controlled under a federal government crackdown on the smoking alternative.
Non-prescription vapes will be banned from importation, and the federal government will work with states and territories to close down the sale of vapes in retail settings.
The tax on tobacco will also increase 5 per cent each year for the next three years, as the government also seeks to curb cigarette smoking through higher costs.
Under new rules, vapes will only be sold in pharmacies and in "pharmaceutical-like" packaging, with certain flavours, colours and other ingredients banned, and the concentration and volume of nicotine reduced.
"These are supposed to be pharmaceutical products," Health Minister Mark Butler told the National Press Club.
"They have to present that way — no more bubblegum flavours, pink unicorns or vapes disguised as pens for kids to hide in pencil cases. Instead, we will have plain packaging with plain flavours."
All single-use disposable vapes will also be banned.
However, the government will also make it easier for people to get a prescription for "legitimate" therapeutic use, such as using vapes to help quit smoking.
The federal budget measure will cost a total of $234 million, including $63 million for a public health campaign to discourage vaping, and $30 million towards support programs to help Australians quit.
A further $140 million to extend the Tackling Indigenous Smoking program will be funded.
And all doctors will be able to prescribe nicotine vapes to smokers looking to quit, rather than smokers needing approval from the Therapeutic Goods Administration.
Increasing the tax on tobacco will bring in $3.3 billion to the federal budget over four years.
"We know that a higher-price cigarette is a more unattractive cigarette," Mr Butler said.
"We will also align the tax treatment of tobacco products so that products like roll-your-own tobacco and manufactured sticks are taxed equally."
While smoking rates in Australia are among the lowest in the world, vaping triples the likelihood someone will take up smoking and more than half of regular vapers are under 30.
A study published in the Australian and New Zealand Journal of Public Health found when over a thousand teenagers aged between 15 to 17 were asked if they knew where to find vapes, four-fifths said they found vapes easy or somewhat easy to buy in retail stores.
Nicotine vapes can only be sold in Australia with a prescription, but a black market for the products is thriving, and non-nicotine vapes sold at convenience stores are often found to contain the highly addictive substance.
Previous attempts to crack down on the illegal importation of nicotine vapes have struggled because the products are odourless and easily hidden.
Mr Butler said that progress made through tobacco reforms he introduced last year threatened to be undone by vaping.
"Vaping was sold to governments and communities around the world as a therapeutic product to help long-term smokers quit," he said.
"It was not sold as a recreational product — especially not one for our kids. But that is what it has become: the biggest loophole in Australian history."
Mr Butler said vaping had become the number one behavioural issue in high schools and a growing issue in primary schools.
"This is a product targeted at our kids, sold alongside lollies and chocolate bars," Mr Butler said.
"Just like they did with smoking, Big Tobacco has taken another addictive product, wrapped it in shiny packaging and added flavours to create a new generation of nicotine addicts."
The reforms are in direct contrast to what had been proposed by tobacco lobby groups, some industry groups and the Nationals, who had suggested an easing of vaping rules for adults in line with the approach taken by countries such as New Zealand.
Dutton backs vape ban as Nationals senator lashes out
Opposition Leader Peter Dutton offered cautious support of the proposal but said he wanted to see more detail.
"I do think there is a significant problem in our country and it needs to be addressed, and we would support the government in sensible measures which saw a reduction in vaping rates," Mr Dutton said.
"I don't want to see vaping as a gate way into smoking."
However Nationals senator Ross Cadell warned that Australia had already "lost this war", and that prohibition would only further grow the vaping black market.
"Is the minister in such a haze that he doesn’t recognise that multinational organised crime gangs are behind the illegal manufacturing, importation, and distribution of this stuff to our kids? Does he think that some crime boss is going to change his packaging, ingredients, and distribution because he says so?" Senator Cadell said.
"Labor's announcement today is the wrong diagnosis for a serious illness."
In a statement, Cancer Council CEO Tanya Buchanan said the government's move was a "historic shift toward ending the vaping epidemic".
"Unlike smoking, we have a window of opportunity to take policy actions that prevent the growing use of e-cigarettes," Professor Buchanan said.
"With support from all levels of government, we can reverse the e-cigarette epidemic and prevent history repeating itself for a new generation of Australians."
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