Developers that order or carry out building work without a permit will face a five-year maximum jail term or $466,380 fine. The maximum fine for individuals will be $93,276 – and, for the first time, they will face five years' jail.

The new punishments were not previously available to the courts.

The state government said the new laws, to be introduced to Parliament this week, were needed following the demolition of the Corkman Irish Pub in Carlton in October and the building fire at the Lacrosse apartments in 2014.

New injunction powers will also allow courts to intervene to prevent illegal building works.

Planning Minister Richard Wynne said the reforms would give Victorians more confidence in the building industry.

"We said we would review penalties after the Corkman pub was demolished and after the Lacrosse fire so that fines are a deterrent and not the cost of doing business," he said.

The reforms also include new regulations for building inspectors to ensure they're qualified and that inspections happen when required.

The government has already introduced five-year prison terms and hefty financial penalties for illegal work to heritage listed buildings.

The 159-year-old Corkman pub was illegally pulled down on October 15, infuriating the community. The hotel had a heritage overlay.

The property is now valued at up to $10 million.

Community anger was further stoked when it was revealed the developers had illegally dumped asbestos from the building at a site they owned in Cairnlea.

In 2014 a smouldering cigarette sparked a fire at the Lacrosse apartment building in Docklands.

It was later revealed that combustible cladding from China had been used in the construction of the building and had failed to meet Australian standards.