Smokers will soon be slugged $40 for a packet of cigarettes.

Bipartisan legislation to increase the tax on cigarettes over four years cleared parliament on Wednesday night.

The excise will increase by 12.5 per cent each year to 2020.

Labor backed the legislation, having announced similar measures before the July 2 election.

Debate on the tax hike in the Senate sparked calls for a rethink of Australia's ban on nicotine e-cigarettes, with Liberal backbencher James Paterson arguing the healthier alternative should be available.