Customs and Other Legislation Amendment (Illicit Tobacco Enforcement Modernisation and Other Measures) Bill 2026

Mr HILL (Bruce—Assistant Minister for Citizenship, Customs and Multicultural Affairs and Assistant Minister for International Education) (09:37): I move: That this bill be now read a second time. This Customs and Other Legislation Amendment (Illicit Tobacco Enforcement Modernisation and Other Measures) Bill is the next step in the government's ongoing crackdown on the criminals behind the illicit tobacco and vapes trade.

This legislation delivers the most comprehensive modernisation of Australia's illicit-tobacco customs enforcement framework since 2018, ensuring laws designed for a very different illicit tobacco market keep pace with increasingly sophisticated criminal enterprises. Illicit tobacco is not a victimless crime. It undermines public health objectives, harms legitimate businesses, deprives governments of critical revenue and provides a significant source of profit for criminal enterprises.

Illicit tobacco is being fuelled by two things: a massive surplus of cheap global production—less than a dollar a packet—which has been weaponised by transnational serious organised criminals. Think of these syndicates as akin to multinational businesses. They're sophisticated, big players.

They're commodity agnostic—they just want to make money. They don't care if it's meth, tobacco, Gucci handbags, wildlife or human trafficking. They just want to make money.

And they're flooding national borders around the world with dirt-cheap tobacco that can be produced for less than a dollar a packet, targeting countries regardless of their public health or excise policies. As we go after these crooks, it's important to remember that despite everything they're chucking at our country, trying to get our kids hooked on nicotine and vapes, the gold-standard data released last month by the Australian Institute of Health and Welfare shows that smoking rates in our country have continued to fall.

Fewer Australians are smoking than ever, and vaping rates have stabilised. Smoking has reached record lows, now down to 5.8 per cent amongst adults. Holding onto these hard-won gains remains our nation's most important public health challenge, as smoking remains the leading cause of preventable death and disease in Australia and still represents 20 per cent of our nation's cancer burden.

Today, 66 Australians will die of a smoking-related illness. And two in three long-term smokers will die of a smoking-related illness. This bill follows the passage last sitting week of the Combatting Illicit Tobacco Bill which raised penalties, opened up new law enforcement techniques and updated the proceeds of crime laws.

This bill builds on that work, further raising the stakes for the criminals. For too long, organised crime has seen tobacco as 'high profit low risk'. This bill will help to reverse that equation, making it easier to disrupt this trade, to prosecute criminals who import, convey or possess illicit tobacco and take their profits and gains.

There are two overarching elements to these reforms. Firstly, this bill will modernise Australia's illicit tobacco enforcementframework to increase deterrence, strengthen supply chain integrity and support more effective enforcement action, while having minimal regulatory impact on legitimate businesses. A central reform is the creation of new offences for importing, possessing or conveying illicit tobacco.

Current tobacco offences often require prosecutors to prove that tobacco has been imported by a person with intent to defraud the revenue. The prosecution must demonstrate that the person was aware that tobacco is subject to a duty collection framework and that duty must be paid on importation. As a result, these offences are routinely frustrated because criminals have adapted by distancing themselves from the border and the importation process, where direct evidence of intent or knowledge is rarely available.

These offences were designed for another era with low-level criminals trying to defraud a bit of revenue. Today, the scale, complexity and sophistication of organised crime groups demands a new approach to going after the criminals—anyone involved—in the illicit tobacco trade. The new offence framework focuses on the unlawful conduct itself and better reflects the realities of modern illicit tobacco offending.

It will make it easier to hold those involved in illicit tobacco operations accountable and improve the ability of law enforcement agencies to pursue serious offenders. To explain, the new law contains a list of "observable indicators" of illicit activity. If any one of these indicators is established, then that is taken to satisfy the reasonable suspicion test of the criminal offence.

The reasonable suspicion under these new laws is an objective test—it does not depend on what an officer or anyone suspects. This allows enforcement agencies to focus on observable facts rather than trying to prove every detail of a concealed illicit supply chain. Examples of the new objective circumstances include: Non-compliant retail packaging, or Non-compliant tobacco products, like menthol cigarettes hiding in plain packaging, or Concealing tobacco to avoid detection, or Missing import invoices or paperwork, or, my personal favourite: If the tobacco sales price is below the excise and GST combined, that fact alone establishes the reasonable suspicion that it was unlawfully imported.

This will be a powerful tool for the Australian Border Force and all state and territory police forces to go after serious and organised crime. Indeed anyone involved in the illegal tobacco and vape trade is on notice. If the ABF or state and territory law enforcement agencies enter a retail premises and establish any of those facts, then action can be taken.

The focus will be on using the new offences to go after serious criminals. But, to be clear, it will also now be easier for law enforcement to target those operating retail businesses that possess illicit tobacco. Companies and corporations may also be targeted because offences apply generally to a "person", and under Commonwealth law a person includes a corporation.

It's in the Acts Interpretation Act. This means a tobacconist company, warehouse company or distributor or transport and logistics company may be investigated and prosecuted. Anyone involved in the illegal tobacco and vapes trade—whether high up in the crime groups, mid-level operatives, distributors or those running and working in retail premises, in the shops—would be wise to get a new job and do so quickly.

At the same time, the bill introduces stronger consequences for the most serious forms of offending, ensuring that organised criminals engaging in conduct at the most serious end of the spectrum receive sentences that appropriately reflect the gravity of their offending. Together, these reforms make the consequences real and the deterrent credible. The bill also helps reinforce the seriousness with which Australia treats prohibited tobacco imports.

Criminals should not be able to avoid meaningful consequences simply because enforcement is focused on the complex question of duty evasion, rather than the more clear-cut, commonsense questions of unlawful importation and possession. These reforms will support the more consistent treatment of illicit tobacco alongside other high-risk prohibited goods and enable enforcement responses that reflect the actual harms associated with this trade.

The bill also closes an important legislative loophole affecting tobacco upon which customs duty has been paid and for which a refund of that duty is available under the Customs Act. This is defined in the bill as duty-refundable tobacco. Duty-refundable tobacco is tobacco supplied to duty-free operators for export or for sale to eligible travellers within their duty-free concession.

However, under the current framework, this tobacco is not subject to customs control. This creates opportunities for diversion into the black market at duty-free prices. The bill restores customs control over duty-refundable tobacco until it is exported or sold to an eligible traveller.

This is important because it will reduce opportunities for diversion and ensure appropriate oversight of these products throughout the supply chain. For legitimate duty-free operators, these reforms largely formalise existing expectations and practices and little will change. This bill is aimed at closing a regulatory gap and strengthening accountability, not imposing unnecessary new burdens on businesses that already handle these products responsibly.

The bill also streamlines the seizure and disposal of illicit tobacco. The sheer volume of illicit tobacco being detected by the Australian Border Force has increased significantly in recent years, with record levels of seizures in March, a record week in March, a record month in April, a record week in April and ongoing seizures of a scale we have not seen, yet seizure processes remain heavily administrative and resource intensive for the officers at the front line.

Officers can spend literally hours documenting and processing individual seizure notices. It's very old fashioned. This valuable operational time could instead be devoted to stopping illicit drugs, weapons and other dangerous goods from entering Australia, rather than to filling out paperwork.

These reforms will enable faster and more efficient seizure and disposal processes. The bill will also ensure that tobacco imported in breach of importation permit conditions can be dealt with as swiftly and decisively as tobacco imported without a permit. It will also prevent criminal actors from exploiting existing claim and notification processes to delay enforcement action and frustrate the disposal and destruction of illicit tobacco.

Finally, the bill strengthens integrity across the customs supply chain. Illicit tobacco operations often rely upon facilitators and intermediaries who provide access to storage facilities, freight networks, depots and other supply chain infrastructure while maintaining an appearance of legitimacy. Existing administrative arrangements do not always provide sufficiently strong or consistent tools to address this behaviour.

The bill introduces additional licensing conditions for customs brokers and customs oversighted depots and warehouses—critical intermediaries and actors in the supply and logistics chain. This will require licence holders to refrain from conduct that facilitates, assists or enables the importation of prohibited tobacco products, conduct that is inconsistent with another condition of the licence or that contravenes a law of the Commonwealth; and it imposes a positive obligation on the licence holder to take all reasonable steps to prevent such conduct occurring within their operations.

The bill will also uplift existing tobacco related licensing obligations for licence holders into the statute. It also renames and expands the remit of the National Customs Broker Licensing Advisory Committee to include the ability to refer applications for new depot and warehouse licences. This will create a more consistent, robust approach to oversight, licensing integrity and compliance across the customs supply chain, enhancing integrity and ensuring that legitimate operators are not disadvantaged by those who choose to facilitate illicit tobacco activity.

Taken together, these reforms strengthen offences, tighten controls over the tobacco supply chain, elevate the seriousness with which prohibited tobacco activity is treated, improve enforcement outcomes, and increase accountability across critical points of the importation process. The second part of the bill strengthens Australia's proceeds-of-crime frameworkto ensure that criminal groups cannot retain the financial benefits generated from unlawful activity.

To be very clear, prosecutions should be pursued where they can be. Tobacco should be seized and destroyed when it is found to be illicit. But these alone are not enough.

Organised crime is ultimately driven by profit. They just want to make money. While prosecutions are important, what the federal police have explained to us is that what we know really hurts these criminal syndicates is to go after them and take their cash, their houses, their cars, their boats and their toys.

To achieve a lasting deterrent effect, law enforcement agencies must able to efficiently—without being tied up in endless litigation—recover the profits and wealth generated by criminal activity. So this bill strengthens the ability of agencies to strip criminals of the profits they are making from their illegal activities. This, of course, applies to much more than just tobacco.

It's modernising the proceeds-of-crime regime, importantly. Pecuniary penalty orders are a key tool in achieving that outcome. They require offenders to repay the financial benefits derived from criminal activity, helping to ensure that crime does not pay.

The bill strengthens the pecuniary penalty order framework by clarifying how those benefits are calculated, ensuring that penalty amounts are reduced only in appropriate circumstances and enabling restrained property to be used more effectively to satisfy court ordered penalties. One specific example is, currently, it appears that some criminals can actually try and deduct the fines that they pay and the penalties that they receive from their proceeds-of-crime profits.

The government's view, reflecting the Federal Police's advice, is that an infringement or penalty is a penalty, and you can't deduct that from your profit. You've still got to repay the profit and cop the penalty. These reforms will reduce legal uncertainty, improve the efficiency of the confiscation proceedings and help ensure that the financial gains derived from criminal conduct are recovered more efficiently.

The bill also updates the production order framework. This is an important mechanism used by law enforcement agencies to obtain information relevant to criminal investigations. The reforms clarify the operation of existing powers, strengthen offences for interference with production order processes and improve the ability of authorities to obtain production orders across all jurisdictions.

They will allow authorities to make or seek production orders from a court during proceedings, not just at the start, because new information arises, and they provide a nationally consistent approach because the current reality is that we have eight separate jurisdictions and different, often conflicting, rules This will make investigations more efficient and ensure that law enforcement agencies can continue to access information needed to pursue criminal assets.

Finally, the bill strengthens Australia's unexplained wealth framework by clarifying the methodology used to calculate a person's total wealth. These amendments will improve the operation of the framework and support a more realistic assessment of a person's 'total wealth', while ensuring it captures property owned or controlled by a person at any time. Together, these proceeds of crime reforms will better equip law enforcement agencies to identify, restrain and recover the financial rewards that make organised criminal activity attractive in the first place.

Conclusion This bill comes at a time when the illicit tobacco trade plied by organised criminal syndicates continues to grow in sophistication. These reforms are practical and targeted and focus on the problematic elements of the sector. They modernise Australia's illicit tobacco enforcement framework, strengthen supply chain integrity, improve operational effectiveness and ensure that organised criminal groups face stronger consequences for their conduct.

Just as importantly, they strengthen our ability to pursue the proceeds, instruments and benefits generated by criminal activity and deny organised crime the financial reward that drives this trade. As a whole, the bill—taken as a whole—helps to protect Australia's borders, support legitimate businesses, strengthen public confidence in the integrity of our regulatory systems and ensure that nefarious criminal groups cannot exploit weaknesses in our legislative frameworks or see penalties as just a cost of doing business.

These reforms form an important part of the nation's overarching approach to combatting illicit tobacco. Action is being ramped up pre-border, at-border and post-border. The best container of illicit tobacco is one that never reaches our shores or passes the border; the Australian Border Force is achieving record levels of disruption offshore and seizures at the border.

The most urgent area for action is post-border. Above all Australians need the states and territories to shut the sleazy illegal shops—indeed any retail outlet—flogging illegal tobacco. Australians would not put up with a meth lab in the middle of their local strip shopping centre, and neither should they continue to put up with these criminals trying to flog nicotine and illegal vapes to get their kids and the next generation hooked.

I acknowledge the nation-leading work of Queensland and South Australia to disrupt the illegal tobacco and vapes trade. The government is working with and supporting all jurisdictions to overhaul their laws, scale up enforcement and shut the shops. Frankly, the big states have been too slow to act, but I acknowledge action is now happening which is welcome.

Victoria's new laws took effect this week and as of this week they are now closing illegal shops. These laws will make it easier for all jurisdictions right across the country to go after any business involved in this trade. It doesn't matter whether they are a tobacconist, a convenience store, a lolly shop, a gelato shop, a servo, a barber, a clothing shop, a restaurant or all manner of outlets.

Any retail premises that chooses to engage in the illegal tobacco trade can be targeted under these laws. It is a disgrace that the coalition has decided to get into bed with One Nation, big tobacco and criminal syndicates to create insane policies to let vapes rip and make money by taxing them as that market grows, as it will. This would drive up smoking and kill untold numbers of Australians.

Nevertheless, I urge all members of this House, and the other place, to support the swift passage of this bill so our law enforcement officials nationwide have the powers that they need and that they have asked for, to go after the crooks at pace. I commend the bill to the House. Debate adjourned.