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

Mr GREGG (Deakin) (12:35): Illicit tobacco is not a victimless crime. It damages public health, it exposes Australians to an unregulated and dangerous market, and it's become an enormously profitable business for serious and organised crime. The Customs and Other Legislation Amendment (Illicit Tobacco Enforcement Modernisation and Other Measures) Bill 2026 is about changing that equation.

For too long, illicit tobacco has offered organised crime an attractive proposition: extraordinarily cheap global supply, enormous potential margins and enforcement laws that have not always kept pace with the way modern criminal organisations operate. The market has changed. Our laws need to change with it.

That is what this bill does. This is the most significant modernisation of Australia's illicit tobacco customs enforcement framework since 2018. It builds on legislation recently passed by this parliament which increased penalties, expanded law enforcement tools and strengthened our proceeds-of-crime laws.

These reforms start with an important understanding of who we're dealing with. These are not simply people moving a few packets of cigarettes to avoid duty. We're dealing with sophisticated criminal organisations.

They operate across borders; they use complex supply chains; they exploit freight, warehousing and distribution networks; and they are not particularly loyal to tobacco. They operate rather like multinational businesses—just without the annual report or the inconvenience of obeying the law. If there is money in tobacco, they will sell tobacco.

If there's money to make somewhere else, they will go somewhere else. The product changes. The motive does not.

They want to make money. So if we want to disrupt the market for illicit tobacco we have to change the calculation being made by the people supplying it: make illicit tobacco harder to import, harder to conceal, harder to move, easier to seize, easier to prosecute and much harder to keep the profits. That is the structure of this bill.

The first problem we are addressing is a very practical one. Our existing tobacco offences can require prosecutors to establish not simply that tobacco is illicit but also what somebody knew about its importation and the duty that should have been paid. Modern criminal organisations understand this.

They separate the different parts of their operations. The person storing the tobacco may be nowhere near the person who imported it. The person transporting it may have nothing to do with the paperwork at the border.

And the people directing the operation can deliberately insulate themselves from both. The further somebody is removed from the original importation, the harder it can become to prove precisely what they knew. The conduct may be obvious.

The evidence required by the existing law may be buried inside a supply chain deliberately designed to conceal it. This bill responds to the world as it actually exists. The new framework allows law enforcement to rely upon observable indicators of illegal activity: Is the tobacco in non-compliant branded packaging?

Is it a prohibited product? Has it been concealed? Are the import records missing?

Is it being sold for less than the excise and the GST legally payable on it? Those are facts that investigators can easily establish. Where the statutory test is met, those facts can establish the reasonable suspicion necessary to establish the new offence.

That is much more practical as a law enforcement tool. Instead of requiring investigators to reconstruct every stage of a deliberately hidden criminal operation, the law allows them to act on the evidence in front of them. Importantly, the law follows the tobacco—importation, possession, transport, distribution and sale.

The objective is not simply to intercept a container at the border; it is to make the entire illicit supply chain more vulnerable to enforcement. The bill also closes an important gap involving duty-refundable tobacco. This is tobacco supplied through duty-free arrangements for export or sale to eligible travellers.

Under the existing framework there are circumstances in which that is not subject to customs control. That creates an opportunity for diversion. The bill restores customs control until the tobacco is actually exported or sold to an eligible traveller.

It sounds technical, but the principle isn't. If there is a gap in the supply chain through which illicit tobacco can flow, close it. Criminal organisations are very good at finding those gaps.

Government needs to become equally good at closing them. The bill also modernises seizure and disposal. The volume of illicit tobacco being intercepted has increased significantly, but some of the administrative machinery surrounding seizures belongs to a different era.

Frontline officers can spend hours documenting and processing individual seizures. That is time they are not spending examining another consignment, investigating another importer or intercepting other prohibited goods. Paperwork is necessary, but paperwork is supposed to support enforcement.

It should not become the enforcement. These reforms streamline seizure and disposal, strengthen the response to tobacco imported contrary to permit conditions and reduce opportunities to manipulate notification processes simply to delay enforcement and destruction. That gives operational time back to the people whose job it is to protect Australia's border.

The bill also recognises a basic feature of organised crime: tobacco does not magically move from an overseas factory onto an Australian shelf; it needs freight, storage, warehouses, depots, transport, some documentation and distribution. Sophisticated criminal organisations therefore look for opportunities to exploit the infrastructure through which ordinary commerce moves.

The bill strengthens obligations applying to customs brokers, depots and warehouses. It requires licence holders to take reasonable steps to prevent their operations facilitating prohibited tobacco imports and strengthens oversight across critical parts of the customs supply chain. If you occupy a trusted position in Australia's customs system, that trust comes with obligations.

If organised crime depends upon access to infrastructure, government should make that access harder. But perhaps the most important principle in this legislation is also the simplest: organised crime is organised around profit. Prosecutions matter.

Seizures matter. Penalties matter. But, if we seize one shipment while the criminal organisation keeps the profits from 10 others, we may have disrupted the business without fundamentally changing the business model.

That is why proceeds of crime matter. The bill strengthens pecuniary penalty orders. It improves the way criminal benefits are calculated.

It allows restrained property to be used more effectively to satisfy those orders. It strengthens production orders so investigators can obtain financial information as investigations develop, and it improves the unexplained-wealth framework so that we can better identify and recover wealth generated through criminal activity. There is a simple principle underneath a lot of complicated law: crime shouldn't pay.

A penalty is a penalty; it is not a business expense. You don't make $10 million from crime, subtract the penalty and call the remainder your profit. That is creative accounting in the most generous sense.

The objective is to make the consequences real. Take the tobacco, take the proceeds, take the property bought with those proceeds, increase the chance of detection and increase the consequences for being caught, and suddenly a market that once looked high profit and low risk begins to look rather different. That is how we attack the economics of organised crime.

Enforcement cannot be separated from public health. Australia has spent decades reducing smoking. Those gains were hard won.

The most recent national data shows smoking reducing. I know there's contest, but the pattern is very clear. We've been reducing our smoking rates for a very long time.

Tobacco nevertheless remains one of Australia's greatest causes of preventable disease and death. So our objective is not simply to change where Australians buy cigarettes; our objective must be to have fewer Australians smoking them. We want people who smoke to quit.

We want fewer young Australians becoming addicted to nicotine. We want to dismantle the criminal economy that has attached itself to these products. That requires enforcement, but it also requires prevention, health promotion, education, cessation support, better intelligence, better border detection, better financial investigation and laws that continue to evolve as organised crime evolves.

There is no simple lever marked 'solve illicit tobacco'. Every government would be happy to pull that lever if it were obvious and there in front of everyone. It is a complicated market.

It requires sustained pressure across the system, and that is what this legislation provides. There is another approach being advanced by the coalition and One Nation. I want to deal with it fairly, because I accept that they are, perhaps in good faith, seeking to address what is a serious problem.

And the starting proposition has force. There is an enormous difference in price between the taxed and lawful tobacco and that which is being sold illicitly. But their proposed response is a dramatic reduction in tobacco excise, with the coalition proposing an 80 per cent reduction, on the basis that cheaper legal cigarettes will draw consumers away from illegal tobacco and undermine the criminal business model.

There is some intuitive logic to that proposition. My concern isn't with their intention; it is with the distance between their confidence of the prescription and the strength of evidence supporting it. An 80 per cent reduction in tobacco excise is an enormous intervention, and its success depends on a sequence of events and assumptions about what happens next.

I looked at the PBO modelling underpinning it. It assumes that the illegal market doesn't respond in any way to that change in market forces. It assumes that the price of illicit cigarettes remains exactly the same as it is, notwithstanding the price reduction.

That would be quite a deviation from all conventional economics. We know that there is room in the profit margins from illicit tobacco to keep up with price. So the risk is that what we would really be doing is, effectively, creating a price war where the price of smoking goes down.

The coalition's own analysis and the PBO reports that underpin it make clear that there is a connection between price and take-up. So, even if you don't believe it is a likelihood, you have to accept that there is a material possibility that you'll be making smoking cheaper and that you will have more people smoking as a result of that approach. When making those suggestions I think it's important to at least have the humility to appreciate that there is a real, material risk of making the problem much worse and that a bidding war with illicit tobacco, as it is currently structured, is a war that the legal market is very unlikely to win.

We could be exacerbating the problem manyfold. So then the question is whether enforcement alone is enough. And now we have data from Queensland: a 55 per cent increase in the take-up of legal cigarettes and significantly more calls to Quitline because the Queensland government has taken enforcement on as a serious idea.

They are shutting down shops. They're using orders to conclude leases. They're creating obligations.

And they're backing it up with resources. The Albanese government is backing them up as well, recently announcing an additional $2.7 million of support for their important enforcement work. We have to appreciate, as the member for Riverina said, that the resourcing of enforcement is a key aspect.

What we see from that demonstration in Queensland is that the Albanese government is ready to stand shoulder to shoulder with state governments of any political persuasion to take this serious issue on. The Queensland government is to be commended—as is the South Australian government, which has followed through with very similar laws. We've seen across the country, including in my home state of Victoria, shops being shut down and this being treated with the seriousness it deserves.

The question is: have we done everything we can to exhaust the capacity of enforcement to respond to this issue? The truth is that, up to this point, we have not. The laws have not been fit for purpose.

We are addressing that now in this bill, and it is being addressed by state governments across the country. It is important that we all take the initiative and that we put the resources into it to ensure that we are facing this crisis head-on. My fear is that a simple bidding war with organised crime is not going to have a happy ending.

We're going to see more smokers. We're going to see more health issues. We're going to see the lawlessness continue as it's going right now.

We need to ensure that we are rigorously reviewing and analysing all of the assumptions underpinning policy proposals. And, with the greatest respect to my colleagues on the other side of the House, I would posit that the analysis is incomplete. It relies on PBO analysis that does not seek to project future behaviour and does not account for the fact that the illegal market may shift its pricing as well.

Those are fundamental issues with any economic analysis of the likely outcome of that excise change. It is an incredibly risky and dangerous proposition, one that Queensland has proven is not inherently necessary to deal with this organised crime issue. We need to make sure that the laws are right, that the enforcement is backed up and that we are doing everything we can to change that risk-reward equation for organised crime.

And that doesn't mean propping up other tobacco products. It doesn't mean promoting vaping in shops around the country. It means dealing with this as both a criminal and a health issue simultaneously, because, ultimately, we want fewer smokers and we want healthier Australians.

The more grounded course is demonstrated by this legislation. We can strengthen enforcement. We can close the legislative gaps that criminals have been exploiting up to this point.

We can increase the probability that illicit tobacco is intercepted. We can make distribution harder. We can improve intelligence, attack criminal finances, confiscate proceeds, strengthen international cooperation, invest in prevention, help Australians quit, prevent young Australians becoming addicted in the first place and measure what works.

Those measures attack both sides of the illicit market. They make the criminal business harder to operate, they make it harder for individuals who are recruited in it to get away with what they're doing and they ensure that organised crime will be kept up with. As they adapt, so will we, and we must be as ready as the organised criminals are to adapt at all times.

We are never going to settle on laws that are perfect, and we do have to be ready to come back in to this House and do whatever is necessary to take this very serious issue on. So I proudly commend this bill to the House.