The accident happened about 15 kilometres south of Oatlands at about  6.15pm.

Police said the crash allegedly occurred when Mr Ellis drove his Mercedes sedan across double white lines on to the wrong side of the highway and continued travelling south in the north bound overtaking lane.

They said the 27-year-old woman was travelling north in the overtaking lane when her  Toyota hatch collided head-on with the Mercedes.

At the time she was overtaking another vehicle. 

She died at the scene.

The impact saw the Mercedes veer into the far lane where police said it collided with a black Commodore sedan which was travelling north.

The Commodore was towing a vehicle on a trailer.

The Commodore's driver, a 23-year-old Rocherlea man, and his female passenger were not injured.

Mr Ellis is in a stable condition in the Royal Hobart Hospital 

Mr Ellis's wife, Anita Smith, was also injured but is expected to be released from hospital later today. 

The accident happened on a stretch of highway where there were two north bound lanes, including an overtaking lane, and one south bound lane. 

Tasmania Police's Southern Crash Investigation Services are investigating the collision and are calling for witnesses or of anyone who may have seen the vehicles prior to the accident.