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Posted by Susan Danks
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12 Oct, 2026
Everyone agrees that illicit tobacco has become one of the most lucrative criminal markets in the country, so the Combatting Illicit Tobacco Bill 2026 was supported by both sides of Parliament. As it received Royal Assent on 26 August 2026, it is now the Combatting Illicit Tobacco Act 2026, and almost all of it is already in force. Section 2 of the Act sets different start dates for different parts. The government's own Illicit Tobacco and E-cigarette Commissioner values the illicit market at between $4.1 billion and $6.9 billion a year, with 50 to 60 per cent of all tobacco sold in Australia now illicit. Increasing firebombing of tobacconists makes the violence impossible to ignore.
The question therefore is not whether this new Act was needed, but whether it goes far enough.
What it does
The Act appears to focus on penalties. Under the Customs Act, the maximum sentence for importing tobacco with intent to defraud the revenue rises from 10 to 15 years, and for reckless importation from five to 10 years. The maximum fine climbs from five times the duty evaded to 30 times, or 12,000 penalty units.
Under the Taxation Administration Act, offences for selling illicit tobacco now extend to "supply", capturing those who distribute, transport or direct the trade, not just the person behind the counter. A new top tier applies to 10 kilograms or more, and the "reasonable suspicion" offences, where prosecutors need only show it was reasonable to suspect duty had not been paid rather than that the accused knew, carry heavier penalties.
The Act also widens investigators' powers. Major illicit tobacco offences become "serious offences" for telecommunications interception warrants. Proceeds of crime powers gain person search warrants, broader access to phones and digital devices, examination orders, and a shorter path to unexplained wealth orders.
What it is meant to do
The Explanatory Memorandum provides that its aim is to "rebalance the risk-to-reward calculation" so that criminals face prison time and lose their assets. It also concedes the Bill "does not introduce substantial new powers” but increases existing ones.
The Illicit Tobacco and E-cigarette Commissioner’s 2024-25 report, published in December 2025, identified four themes: stronger consequences, multi-agency capability, unified information and data, and demand reduction. This Act only seems to address one of them.
The gaps
Maximum penalties are imposed, but in practice our courts appear to rarely impose sentences anywhere near that level, fines are hard to recover, and criminals possibly regard them anyway as just an operating cost. To me it seems the obvious deterrent is the real possibility of being detected, prosecuted and stripped of assets. That outcome however needs enough investigators, and funding and agencies working together, not just a reliance on higher maximum penalties in legislation.
Successive excise increases have made legal tobacco among the most expensive in the world, creating the price gap that encourages this black market
The underlying problem is that caused by the separation between the states and the federal government. The Commonwealth controls the border, customs, excise and interception. It does not license shops. Retail licensing and enforcement belong to the states and territories, which have different regimes and policing. Raid a store and the criminals lose stock, but then reopen under a new name down the road. Compliance checks have historically fallen to council and health inspectors trained to check warning labels, not to confront organised crime at this level.
A proper response requires the Commonwealth, the states, the AFP, the ATO and local councils sharing information and running joint operations, instead of each working alone. It needs a binding intergovernmental agreement for uniform, properly policed retail licensing in every jurisdiction, which should be achievable. This Act delays one of its own provisions so the states can sign a new agreement on unexplained wealth and asset confiscation. If governments can cooperate on seizing criminal assets, they can cooperate on who is allowed to sell tobacco.
Let’s not forget price to the consumer. Successive excise increases have made legal tobacco among the most expensive in the world, creating the price gap that encourages this black market. The Opposition cites Parliamentary Budget Office estimates that the government's excise policies will reduce revenue by more than $20 billion over five years to 2028-29, against a 2023 forecast of a $3.3 billion increase. A tax that collects less while enriching criminals needs another harder look.
The burden on the legitimate trade
The Memorandum assures us the Bill imposes no additional burden on business. Yet on 10 September the government introduced a follow-up Bill placing new statutory tobacco obligations on licensed customs brokers, depots and warehouses, much of it never discussed with industry. Customs broker numbers are already falling. Each new layer of liability lands on compliant operators, not on criminals who ignore the rules.
The new Act gives law enforcement sharper tools, and that is welcome. But until the states act against the shops and Canberra confronts the problems it created, criminals will simply adapt to the penalties.
