Customs and Other Legislation Amendment (Illicit Tobacco Enforcement Modernisation and Other Measures) Bill 2026
Mr BIRRELL (Nicholls) (12:50): I rise also to speak on the Customs and Other Legislation Amendment (Illicit Tobacco Enforcement Modernisation and Other Measures) Bill 2026. I appreciate the comment of the previous, government speaker that what we want is fewer smokers and less smoking. He acknowledged that that is what people on both sides of this House want and the difference of opinion is in how we go about it.
I appreciate him for acknowledging that; not all of his colleagues have. There have been some spurious accusations that somehow our policy seeks to have more smokers. That is not the intention.
It's just how we go about it in terms of a public policy response. There is something that I see regularly as a Victorian—as someone from a Victorian regional city. In the cities and towns of my electorate of Nicholls, there are outlets that freely trade in illicit cigarettes and vapes.
I could take you to a convenience store in the CBD of Shepparton. It has lollies on the shelves and giftware on display, but behind the counter there are loose tobacco, cartons of manufactured cigarettes and vapes. It is open seven days a week, there is a steady stream of customers and there is no great effort to conceal what is happening because the illicit market has become normalised, brazen and deeply embedded.
A carton of Manchester Cigarettes imported from the UAE—10 packets of 20 cigarettes—can be bought for $120 cash or $140 by card. That's $12 a packet if you're using cash. A carton of the equivalent legal product at a major retailer costs $489.90, just under $50 a packet.
Earlier this year, there was even a shortage of illicit tobacco. That wasn't caused by effective enforcement in Australia. It followed disruption to the market—to the international shipping—associated with the conflict involving Iran.
The illicit market adapted, and cigarettes produced for the Australian market, complete with health warnings and apparently sold as seconds, appeared for just $9 a packet. I wanted to bring up that example from my electorate—and it's happening across Australia but very prevalent in Victoria—because it tells us three things. The first thing it tells us is that illicit tobacco is not confined to back alleys or obscure criminal exchanges.
It is being sold through ordinary-looking retail premises. The second thing that it tells us is that the price gap between legal and illegal products is so extreme that it has created an enormous commercial opportunity for organised crime. The third thing is that the supply chains behind this trade are international.
They are resilient and they are capable of adapting quickly. I think it's against that reality that this House needs to consider the bill. The coalition's position is that we will not oppose this bill.
We support sensible measures that give Commonwealth law enforcement and border agencies stronger tools to combat illicit tobacco. This crisis is far too serious for this parliament to reject practical improvements merely because they are incomplete. They are practical improvements, but the response of this government is incomplete and the response of the Victorian government is incomplete.
I note that the Victorian government has been there since 2014 and the federal government since 2022, and the problem is getting worse. This bill amends the Customs Act 1901 and the Proceeds of Crime Act 2002. It creates a clearer offence framework for tobacco that's unlawfully imported into Australia and then possessed, moved, sold or supplied within Australia.
It seeks to overcome longstanding evidentiary difficulties by allowing the illicit character of tobacco to be established through objective circumstances that give rise to a reasonable suspicion, and those circumstances may include an extraordinarily low price, packaging that does not comply with Australian government requirements or an inability to identify a legitimate source or supply chain.
These are sensible reforms. An enforcement framework should reflect the practical reality facing the investigators and the people who have to lay charges in relation to this. When cigarettes are sold at a fraction of the lawful retail price from premises that are unable to demonstrate a legitimate source, the law should not require agencies to perform the impossible before they can act.
The bill also strengthens the proceeds of crime measures. That matters because product seizures alone are not enough. Organised crime treats stock losses as a business expense, and the previous speaker enunciated this very well.
The more effective response is to follow the money, restrain assets, recover criminal profits and prevent offenders from arranging their affairs in order to frustrate confiscation. The bill further tightens the integrity of customs depots and licensed warehouses through stronger licensing, compliance and oversight arrangements and it increases the scrutiny of licence holders, associated persons and those with access to customs controlled premises and goods.
These are worthwhile measures to reduce opportunities for tobacco to be diverted into the black market. It's a worthwhile bill and it will be supported, but support for these measures must not be confused with satisfaction from those on this side of the House, our communities that we represent or the broader community about the government's overall response to this problem.
After years of failed predictions and a rapidly expanding black market, there is little basis for confidence in Labor's management of this issue. No-one should mistake this bill for a comprehensive answer. Illicit tobacco is now a major organised crime, border security, community safety, public health and revenue crisis.
The government's own Illicit Tobacco and E-cigarette Commissioner estimated that illicit products accounted for between 50 and 60 per cent of tobacco sold in Australia in 2024-25. The estimated value of that market was between $4.1 billion and $6.9 billion while estimated excise and duty evasion was between $7.7 billion and $11.8 billion, so billions of dollars are flowing away from legitimate businesses and into criminal networks.
The Australian Criminal Intelligence Commission has warned that organised criminals regard illicit tobacco as low risk and high reward. It should be high risk and low reward. It has previously observed that, on some importation models, one successful container out of 30 can be enough to return a profit.
That's an economic proposition that Australia has allowed criminal syndicates to exploit. This is not simply about somebody buying cheap cigarettes under the counter. Australia has seen deaths, firebombings, intimidation, extortion and violence linked to the illegal market.
Legitimate small businesses have been threatened, communities have been placed at risk, and revenue that should support hospitals, schools, roads and essential services is instead financing organised crime, not to mention that, when those businesses located next door to the illegal tobacco suppliers get firebombed, they get affected and have to deal with the insurance fallout as well.
AUSTRAC has identified the trade as a serious organised financial crime problem. Cash deposits, private ATMs and EFTPOS facilities can all be used to move and disguise illicit proceeds. That's why the proceeds of crime provisions in this bill matter, but it's also why legislation must be matched by intelligence, operational capacity and sustained financial disruption.
There have been some significant seizures. The Australian Border Force reported that, in 2025-26, it seized more than 2.2 billion cigarette sticks, more than 586 tonnes of loose-leaf tobacco and more than 13.2 million illicit vaping products at the border. Those results demonstrate dedicated work by officers, but they also reveal the extraordinary scale of the trade that they are confronting.
And while record seizures occur at the same time as the illicit retail market continues to grow, it demonstrates that interdiction alone is not a silver bullet. A policy failure on this issue is that Australia has reached this position despite new offences, higher penalties, funding announcements and repeated assurances that enforcement has been strengthened.
Labor's fundamental mistake has been to treat the crisis principally as an enforcement problem while refusing to confront the policy settings that have made the illicit market extraordinarily profitable. In the May 2023 budget, Labor imposed an additional tobacco excise increase of five per cent in each of the three successive years on top of an existing twice-yearly indexation.
Those increases took effect in September 2023, 2024 and 2025. The government forecast that this higher excise would raise an additional $3.3 billion over the forward estimates. Instead, tobacco revenue has fallen dramatically as consumers shift towards the illicit market.
So the policy didn't eliminate demand. It redirected the demand into a criminal supply chain. And it doesn't diminish the profound health harms caused by smoking.
It means policy must respond to evidence and to the unintended consequences. A tax that is avoided on a massive scale does not produce its intended health or revenue outcome. It produces a windfall for organised crime.
The government points to hundreds of millions of dollars in additional enforcement funding, yet the illicit market continues to expand. Former senior border officials have described the response as 'an under-resourced game of Whac-A-Mole' with inadequate intelligence and too few experienced personnel. The central problem underlying this bill is therefore straightforward: police can be given stronger powers, but if the potential profit remains extraordinary and the risk remains manageable then organised crime will continue to enter, adapt and ruthlessly exploit the market.
The coalition's alternative is a substantially more comprehensive policy. It's designed not only to pursue criminals after an offence but to destroy the business model that sustains them. Our plan combines tougher enforcement with the reform of the tax and regulatory settings that have pushed consumers into the black market, together with stronger measures to reduce smoking and nicotine harm, and that's what we want to achieve.
First, the coalition proposes an 80 per cent reduction in tobacco excise. This would lower the excise component of a standard pack of 20 cigarettes from around $30 to $6, with the rate reviewed after two years. The purpose is not to encourage smoking—absolutely not.
The purpose is to collapse the extraordinary price differential that's made Australia one of the most lucrative illicit tobacco markets in the world and to shift consumers away from organised crime and back to a lawful regulated market and then hopefully out of tobacco altogether. Secondly, we propose a $200 million nationwide law enforcement blitz. This would support additional raids, arrests, seizures, investigation, shop closures and border disruption with a stronger operational focus across the Australian Border Force, the Australian Federal Police, the Australian Criminal Intelligence Commission and AUSTRAC.
Third, we would establish a legal, regulated and taxed adult market for nicotine vapes and nicotine pouches while maintaining firm protections for children. The current arrangements have handed too much of this market—and it is a market; I don't like that it's a market, but it is a market—to unregulated sellers. A controlled adult framework would impose lawful standards, reduce the black market and protect minors more effectively than a system that is widely evaded.
Fourth, we would invest $60 million in a national public awareness and education campaign. Australians should understand that a cheap packet of cigarettes or an illicit vape is not a harmless bargain. It can be part of a supply chain involving tax evasion, money laundering, intimidation and violence.
At the same time, the campaign must reinforce the dangers of smoking and help people access effective cessation support, because that's what we all want to achieve. It's not enforcement instead of prevention, regulation or education. It's an integrated approach.
That's what we've been missing: an integrated approach that recognises that supply, demand, price regulation, health and organised crime are interconnected. Done properly, this is how the House ensures that urgent action can work. The coalition's position is straightforward.
We're not going to stand in the way of sensible new enforcement powers, and this bill is part of that. We support measures that help border and law enforcement agencies identify unlawful tobacco, disrupt distribution, secure the customs supply chain and seize criminal assets. But we will not pretend that another set of enforcement amendments, by itself, can solve a crisis that has continued to deteriorate under this government.