Govt might lack funds to fight big tobacco

The legislation requiring all cigarettes to be sold in drab olive-brown packs with prominent health warnings passed the Upper House on Thursday evening.

But the draft laws will have to return to the Lower House for a final tick of approval, after the start date was amended.

Plain packaging will now be enforced from December 2012 – six months later than originally planned.

British American Tobacco Australia (BATA) confirmed on Thursday it would launch a challenge to the laws as soon as they received royal assent.

The company will argue it is unconstitutional for the government to remove its trademarks and other intellectual property without compensation.

"The result of BATA's legal challenges could force Health Minister Nicola Roxon to pay tobacco companies billions of dollars for the removal of trademarks, brands and pack space," the company said in a statement.

However, Labor insists it is on strong