Customs and Other Legislation Amendment (Illicit Tobacco Enforcement Modernisation and Other Measures) Bill 2026
Ms PAYNE (Canberra) (12:06): My constituents often raise with me their concern about the sale of illegal tobacco in our community, the stores that are selling it and that seem to be getting away with it and the impact that it's having on people, particularly children and young people who might be encouraged to take up smoking in spite of the decades of action that we've taken to prevent this.
This bill, the Customs and Other Legislation Amendment (Illicit Tobacco Enforcement Modernisation and Other Measures) Bill 2026, is all about taking the fight up to the suppliers and sellers of illegal tobacco and nicotine products in our communities. For too long, these insidious purveyors of illegal tobacco have been able to get away with their crimes because of gaps in policing and loopholes in law.
Organised criminal syndicates have looked at the illicit tobacco trade and seen an opportunity for big profits. Comparatively low risk and penalty regimes have not kept pace with the scale and sophistication of their operations. While our law enforcement agencies have worked tirelessly with the tools available to them, those tools have simply not been sharp enough for the job at hand, and this bill will sharpen them.
The only way to address the scourge of illegal tobacco is by giving the Australian Federal Police, Customs and police in the states and territories all the tools they require to take on sellers and by implementing reforms that prevent importing and profiting from illegal tobacco. We cannot tinker around the edges of this problem. We cannot rely on piecemeal, jurisdiction-by-jurisdiction responses to what is fundamentally a national and, in many respects, an international criminal enterprise.
This bill recognises that reality and responds to it with a coordinated, modernised legislative framework. This bill will amend the Customs Act 1901 and the Proceeds of Crime Act 2002 to implement reforms relating to illicit tobacco enforcement and proceeds-of-crime investigations. The bill will modernise illicit tobacco offences, restore customs control over duty refundable tobacco, amend seizure and forfeiture arrangements, introduce tobacco-related licensing conditions, amend production order and pecuniary penalty order frameworks and enhance the efficiency of the unexplained wealth framework.
Taken together, these measures represent the most significant modernisation of our illicit tobacco enforcement architecture in a generation. Existing tobacco offences often require proof that tobacco was imported with the intention of defrauding the revenue. In practice, this has proven to be an exceptionally high bar for prosecutors and investigators to clear.
Criminal networks are sophisticated. They structure their operations specifically to obscure intent, to distance the organisers from the physical goods and to ensure that, by the time law enforcement catches up with a shipment, establishing the precise state of mind of those responsible is close to impossible. This is precisely the kind of loophole that has allowed the illicit tobacco trade to flourish largely unchecked.
This bill will close that loophole by introducing new offences relating to the importation, possession and transportation of illicit tobacco products based on reasonable suspicion that goods have been unlawfully imported or that importation would result in a defrauding of the revenue. This is a commonsense, proportionate reform. It brings our tobacco offences into line with the standard of proof used effectively in other areas of customs and border enforcement, and it removes an artificial barrier that has for too long protected the people at the centre of this criminal trade rather than the community.
This is about giving police and customs officials the tools they need to take the fight up to illegal tobacco importers and sellers. It is about ensuring that when our officers identify a shipping container, a warehouse or a retail outlet dealing in illicit tobacco the law empowers them to act decisively—to seize the product, to pursue forfeiture, to shut down the business and to follow the money back to the organisers who are profiting from this trade—rather than being tied up in proving an intention that the criminals themselves have gone to great lengths to conceal.
The reforms to the unexplained wealth framework are just as important. We know that the illicit tobacco trade is not simply about cigarettes changing hands on a street corner. It is a multibillion-dollar criminal enterprise that funds broader organised crime and in some documented cases has been linked to violence, extortion and arson attacks on competitors as well as legitimate retail businesses that refuse to stock illegal product.
By enhancing the efficiency of the unexplained wealth framework, this bill helps to ensure that the proceeds of this criminality can be identified, traced and clawed back, hitting these networks where it hurts most: their bottom line. Restoring customs control over duty-refundable tobacco addresses another significant gap that has been exploited by those seeking to move product outside legitimate channels.
The introduction of tobacco related licensing conditions gives regulators a further layer of oversight, making it harder for illegitimate operators to gain a foothold in the market in the first place. It would be remiss of me not to address the response from those opposite. The populist parties of the Right—the Liberal, National and One Nation parties—are engaged in a race to the bottom with their frankly bizarre calls for tax on tobacco to be cut.
This is an absurd proposition. Making tobacco cheaper would not prevent sellers of illegal tobacco from undercutting the price of legal products. It is a policy response built on a fundamental misunderstanding or a wilful misrepresentation of how the illicit market actually operates.
Illegal tobacco will always be cheaper than legal tobacco, even if taxes were to be completely removed. That is because the entire business model of the criminal syndicates behind this trade depends on evading duty, evading regulation and evading the costs that legitimate businesses are required to bear. You cannot outcompete an operator who pays no tax, follows no packaging or quality standards and answers to no regulator simply by lowering the tax paid by legitimate retailers.
That gap will always be there. The criminals will always find a way to keep their product cheaper, because undercutting the legal market is the entire point of what they do. Only tougher laws and better enforcement can possibly stop the criminal activity around tobacco supply and sale.
That is the plain, unavoidable truth that those opposite refuse to confront. It is far easier politically to promise people cheaper cigarettes than it is to do the hard work of modernising customs offences, closing legal loopholes and giving police the investigative powers they need. The Albanese Labor government is not interested in easy answers that leave Australians worse off.
Of course, making cigarettes cheaper would achieve the attraction, addiction and killing of countless thousands of new smokers. That is basic economics and basic public health—evidence recognised in this country and around the world for decades. When the price of a harmful addictive product falls, consumption rises, and it rises most sharply among young people and low-income Australians, who are the most price-sensitive and most vulnerable to developing a lifelong addiction, Cutting tobacco tax is not a victimless piece of economic tinkering.
It is a policy that would put more cigarettes into the hands of more teenagers, in more schoolyards and in more communities right across this country, including here in my community of Canberra. Making cigarettes increasingly expensive has been an enormous success in driving down the numbers of smokers in Australia. Successive governments, both Labor and coalition, have understood that price is one of the most powerful levers we have to reduce smoking rates, particularly among young people who have not yet formed the habit.
This has had obvious benefits for the general health of Australians and helped to reduce the costs of tobacco related illnesses on our healthcare system—costs that are ultimately borne by every taxpayer, every hospital and every family who has watched a loved one suffer through a smoking related illness that could have been prevented. It is simply incomprehensible for anyone to suggest that it's a good idea to undo decades of progress on smoking rates by cutting the price of cigarettes.
We would be trading away a public health success story, built up carefully over generations, in exchange for a short-term political talking point—and for what? To hand a competitive advantage to criminal syndicates, who will simply drop their own prices further to stay ahead. It defies logic, and it defies the responsibility we all hold as members of this place to legislate in the long-term interests of the Australian people, not the short-term interests of a headline.
Whether we like it or not, cutting tobacco tax would mean fewer quitters, smokers smoking more cigarettes every day and more kids taking up smoking, all of which equals more tobacco related disease and death in Australia, and the opposition haven't even bothered to cost the impact on government health budgets of that happening. In fact, the coalition policy would give the multinational tobacco industry a multibillion-dollar tax cut that they are not even forced to pass on to customers.
Their policy would do nothing to eliminate the illicit trade or the violence over market share going on between criminal sellers. The coalition's financial estimates on their tobacco policy simply don't make sense. They claim that $8 billion over four years, or around $2 billion per year, will be raised by cutting by 80 per cent a tax rate that currently raises around $4 billion per year from imported tobacco.
It's sloppy calculations like this that go to the heart of why the coalition cannot be regarded as a party with economic credibility. They imply that what will magic up this outcome will be that smokers currently buying cheap, illegal cigarettes will all willingly shift to buying taxed cigarettes. But that would require nearly eight times as much legal tobacco consumption as is happening today, and why would any smoker currently buying cheap, illicit smokes do that, when the illegal sellers will still have lower prices on day one and plenty of room to go lower if they need to?
They also think that a new tax on vaping would somehow contribute financially, but we've already got a regime for people to get regulated vapes from chemists to help quit smoking, and you can't sensibly tax them. The coalition even had the nerve to claim that their imagined increased revenue would pay for increased enforcement funding to offer to the states but that, at the same time—like the magic pudding—it would also pay for petrol tax cuts right here in 2026.
What a total fraud on the Australian public. All this is being justified by a mythical 'PBO costing' document, which they are too afraid to let anyone see, including the media. In fact, the coalition leadership know that their cost estimates are a fantasy, which is why they won't even share it with the shadow health minister.
Making cigarettes cheaper isn't what parents in my electorate of Canberra want to see. They tell me that they want their children to grow up free of the scourge of nicotine addiction. They tell me that they want their kids to grow up in a society that is free of the temptation to buy a pack of cheap cigarettes to try with their friends or to be lured towards vaping and nicotine products marketed and sold entirely outside any regulatory oversight.
They tell me that they want to see government take strong action to destroy the illegal tobacco trade, not hand it a competitive gift by making the legal product cheaper and, in doing so, growing the overall pool of smokers that the illegal trade can also draw from. I have heard from local small retailers in Canberra who are doing the right thing—selling tobacco legally, paying their duty, following the rules—and who are watching illicit tobacco outlets undercut them, sometimes operating brazenly and openly without fear of serious consequence.
This is not a level playing field, and it is not fair to the businesses in our community who play by the rules. This bill is about restoring that fairness, as well as protecting public health. This government is committed to a comprehensive approach: strong deterrence through the tax and excise system to reduce the number of Australians taking up smoking in the first place, combined with strong, modern law enforcement powers to dismantle the criminal trade that has sought to profit from addiction.
Those two elements work together. They are not in tension as those opposite would have us believe. Weakening one does not strengthen the other.
It simply hands more ground to organised crime while doing nothing to protect the young Australians we should all be trying to keep away from a lifetime of nicotine addiction. I commend the work that has gone into developing this bill, including the consultation with state and territory police forces, customs officials and health experts, who have long called for these reforms.
This is legislation that responds directly to what those on the front line of this fight have been telling government: 'Give us the powers, close the loopholes and let us do our jobs.' The people of Canberra, and Australians right around the country, deserve a government that takes the fight up to organised crime, that protects public health and that does not cave to simplistic slogans dressed up as policy.
This bill delivers on all three fronts, and I commend the bill to the House.