Combatting Illicit Tobacco Bill 2026

Ms CLUTTERHAM (Sturt) (13:15): I rise to speak in support of the Combatting Illicit Tobacco Bill 2026. There are two key purposes at the heart of this bill. Firstly, it seeks to reframe the risk-to-reward calculation for organised criminal actors by increasing penalties for offences to ensure they are commensurate with the harms caused by the illicit tobacco trade and, secondly, seeks to make the Proceeds of Crime regime more effective to pursue the confiscation of the proceeds, instruments and benefits of crime to undermine the profitability of the illicit tobacco market, which is the main motivation of organised crime.

Firstly, however, it's important to be clear about what exactly is meant by illicit tobacco. In this country, tobacco is illicit when it is grown, manufactured and/or produced in Australia or imported into the domestic market without the appropriate customs duty being paid. Products can include cigarettes, cigars, loose tobacco, tobacco leaf and plant matter, and also includes the unlicensed production of tobacco plant or leaf, the manufacture of tobacco products and tobacco sold without the payment of taxes.

It's illegal to grow tobacco in Australia without an appropriate excise licence. Currently, no-one is licensed to grow or manufacture tobacco seed, plant or leaf for commercial sale or personal use. Organised crime syndicates do not care about this, of course, and are significantly engaged in running these growing operations, sometimes by targeting unsuspecting landowners by attempting to lease land to grow illicit tobacco.

These operations are not run by genuine farmers or landowners but by criminals living and operating in local communities. Organised crime syndicates also target tobacco retailers across Australia to buy and sell illegally grown tobacco, also known as under-the-counter or black-market tobacco. Buying and selling illicit tobacco is a serious tax crime.

Retailers who become involved in the illicit tobacco trade not only contribute to the loss of funding for essential community services, but they also gain an unfair advantage over honest businesses who are not participating in the illicit tobacco trade, so removing illicit tobacco from our streets helps to create a level playing field for all retailers. The statistics regarding illicit tobacco are grim.

It's estimated that between 50 and 60 per cent—now increased up to 80 per cent, as of today—of all tobacco products sold on the domestic market in Australia are illicit. Vapes account for almost 96 per cent of e-cigarettes purchased in Australia, with almost every one of them being illicit. With vapes representing a market value of over $1.5 billion and organised crime syndicates estimated to be earning just under $7 billion, that is a serious problem.

Billions of dollars of earnings going to organised crime syndicates from illicit tobacco enables them to channel those funds into other illegal enterprises, including illegal drugs, scams, trafficking and money laundering. Suggestions that it is just tobacco, plants or vapes sorely underestimate the scale of the consequential effect of this illicit trade. The trade of illicit tobacco can no longer be left as low risk and high reward, because of where the illegal revenue is directed.

The tobacco tax gap, which is the difference between the estimated value of the excise or customs duty raised from tobacco according to the law, or the tobacco duty, the value actually raised for a financial year, was estimated in the 2023 financial year to be 14.3 per cent or $2.7 billion in lost excise revenue. That figure is increasing. The effect of this is that organised criminal activities are benefiting, to the tune of billions of dollars each year, to the detriment of the funding of essential community services.

This is a huge challenge for government and for Australia's Illicit Tobacco and E-cigarette Commissioner—the first role of its kind in the world. Established in 2024, the purpose of the ITEC is to coordinate national efforts in the fight against illicit tobacco and e-cigarettes by reviewing and reporting on how well current actions are working. This will help provide government with evidence based advice covering policy, legal changes, new trends and future plans to combat illegal activity.

The ITEC's remit is as follows: provide strategic leadership across all levels of government to improve cooperation and communication bring together key law enforcement and health agencies to use their combined expertise, resources and knowledge guide policy and operational decisions based on data-driven insights … … … adapt policies and strategies to respond to new challenges in the illegal market guide changes in laws and policies to handle the complex issues around illicit tobacco and e-cigarettes.

This bill is an important step in beefing up Commonwealth laws by increasing penalties to make the consequences of participating in the illegal tobacco trade much greater for criminals. Amendments to the Customs Act, the Excise Act, the Taxation Administration Act and the Telecommunications (Interception and Access) Act will see penalties increase for offences relating to the importation, possession, buying, selling, supply, production or manufacture of illicit tobacco.

Not only is this designed to operate as a deterrent; increasing penalties will enable more effective investigatory powers to be used on a broader range of illicit tobacco offences, including computer access and surveillance activities under the Surveillance Devices Act 2004. Additional amendments will also enable telecommunications interception powers to be used, by listing tobacco offences as serious offences under section 5D of the Telecommunications (Interception and Access) Act.

This will enable law enforcement and intelligence agencies to seek telecommunications interception warrants for the investigation of these offences, and it sends a strong signal that this government more than recognises that the illicit tobacco trade is a serious problem. It sends a strong signal that the government is committed to stamping it out. The signal is illustrated by a cursory read of the nature of the serious offences already listed in section 5D.

This amendment therefore elevates the nature of illicit tobacco offences, meaning greater powers for law enforcement agencies to deal with them. More powers and information-gathering tools for law enforcement agencies improve the prospects that sufficient evidence will be gathered to successfully prosecute criminal actors committing illicit tobacco offences within our legal system, at the same time as protecting the important safeguards within that system.

Offences for which penalties will increase are numerous. Under the Customs Act, penalties will be increased for 'importing tobacco with the intention to defraud the revenue and importing tobacco reckless as to whether doing so would defraud the revenue' and for 'moving or possessing tobacco knowing the tobacco was imported with intent to defraud the revenue, and moving or possessing tobacco reckless as to whether doing so would defraud the revenue.' Then, under the Excise Act, penalties will be increased for 'fault-based and strict liability offences relating to the dealing in, manufacture, storage and production of illicit tobacco' and 'fault-based and strict liability offences relating to the making or using counterfeit tobacco labels'.

Then, under the Taxation Administration Act, penalties will be increased for 'the reasonable suspicion and fault-based offences for the possession, sale or buying of tobacco of various quantities where excise or customs duty has not been paid'. It will also 'extend the operation of offences for the sale of illicit tobacco to include the supply of the tobacco' and 'introduce an additional threshold quantity of 10kg or more for reasonable suspicion and fault-based tobacco offences'.

It will also increase the penalties for offences regarding the possession of equipment for use in the illegal manufacture or production of tobacco and increase the civil penalty for the possession of tobacco without relevant documentation. With respect to the proceeds of crime, the reforms proposed in this bill seek to prevent offenders from benefiting from the criminal profits generated from illicit tobacco.

This empowers law enforcement to confiscate from people convicted of a criminal offence the fruits of their illegal labours. Proceeds of crime may include cash or bank accounts with funds derived from crime; real estate purchased with criminal proceeds; things like vehicles, jewellery or other luxury items bought with illicit funds; and investment, shares or cryptocurrency connected to unlawful activities.

In Australia the proceeds of crime framework is designed to confiscate proceeds of crime and allow for those confiscated funds to be used to benefit the community. Section 298 of the Proceeds of Crime Act provides that the proceeds of crime may be reinvested in programs directed at crime prevention and in law enforcement. First and foremost, of course, the intention is to deprive criminals of their unlawfully acquired assets in a punitive way and, in the process, to hopefully deter them from further offending and remove such assets from the pool available for further offending by them or others, which is particularly relevant to organised crime syndicates.

The reforms in this bill will see information obtained through investigations conducted under the auspices of the Proceeds of Crime Act being shared with other Commonwealth regulators. This ensures that our regulatory bodies can identify and take action against professional facilitators that continue to assist criminal actors. Unexplained wealth will also be the subject of amendments to the Proceeds of Crime Act through this bill.

Unexplained wealth is the value of a person's wealth less the value of their lawfully acquired wealth. Unexplained wealth orders require wealth deemed to be unexplained to be paid to the government. These laws have been put in place to target and disrupt the business model of serious and organised crime by removing the rewards connected to criminal activity.

When implemented successfully, whilst also acting as a deterrent, unexplained wealth orders prevent crime by diminishing an offender's capacity to finance future criminal activity in which they might engage. Again, this is highly relevant for organised crime syndicates currently taking advantage of the low-risk high-reward illicit tobacco trade. In terms of how this will operate, part 5 of schedule 3 of the bill seeks to insert a new definition of 'non-referring signatory state' to enable a jurisdiction that has signed up to the Intergovernmental Agreement on the National Cooperative Scheme on Unexplained Wealth to participate in equitable sharing arrangements already existing in the Proceeds of Crime Act.

This amendment will further national efforts and cooperation to tackle serious and organised crime by enabling all signatories to the intergovernmental agreement to be involved in discussions on equitable sharing. Further, part 6 of schedule 3 of the bill seeks to remove the requirement for a competent court to make a preliminary unexplained wealth order prior to considering a proceeds of crime authority's application for an unexplained wealth order.

This is duplicative and inefficient without materially advancing the objectives of the Proceeds of Crime Act. These amendments would enable unexplained wealth proceedings to progress more efficiently and more consistently with other Proceeds of Crime Act confiscation mechanisms. This bill continues Australia's fight to contain and reverse the growth of the illicit tobacco market, which is essentially taking funds out of essential community services—hospitals, schools, roads, infrastructure.

Every criminal syndicate disrupted, every dollar derived from crime confiscated and every successful prosecution put the illicit market on notice. I commend the bill to the House.