Customs and Other Legislation Amendment (Illicit Tobacco Enforcement Modernisation and Other Measures) Bill 2026
Ms TEMPLEMAN (Macquarie) (13:05): I want to start speaking on this bill, the Customs and Other Legislation Amendment (Illicit Tobacco Enforcement Modernisation and Other Measures) Bill 2026, by being very clear about what we are tackling here. Organised crime is flooding the world with cigarettes that are produced for less than a dollar a packet. The illegal trade in tobacco is booming in the EU and, according to a report by the European Court of Auditors, almost one in 10 cigarettes there is produced illicitly or smuggled, causing an estimated 13 billion euro loss in tax revenue each year.
In the US, according to the Centers for Disease Control and Prevention, anywhere from eight to 21 per cent of the approximately 264 billion cigarettes consumed in the US avoid or evade taxes, which equates to up to a US$6 billion loss for local and state revenues, and that's largely because of organised crime buying in low-tax jurisdictions and reselling in high-tax jurisdictions.
The point is that, where organised crime sees an opportunity, they will take it, and Australia has not had the right regime in place to tackle their activity. Back before the 2022 election, the Australian Criminal Intelligence Commission revealed that the amount of profit organised criminals make on just one container full of cigarettes means they only need one out of 30 containers to get through to still make a profit.
They said that, while the profits were not as high as those for illicit drugs, the reality was that the penalties were less and the risk-reward pay-off was a lot more favourable to organised crime groups. We've been changing that, and this legislation is the next step in the government's ongoing crackdown on the criminals behind the illicit tobacco and vape trade.
What we're debating today represents a comprehensive modernising of Australia's enforcement framework. The most comprehensive since 2018, it will keep pace with the increasingly sophisticated illicit market. Before I speak to the detail of our measures, it's also important to acknowledge that there are many victims of this illegal trade, and they include those who've been victims of violence by organised crime.
They also include legitimate businesses that are harmed by illegal sales: law-abiding retailers, small-business owners and local shopkeepers, who cannot compete with untaxed black market prices. Government and taxpayers are impacted because critical tax revenue is not paid and public health loses. It says a lot about the good sense of Australians that smoking rates have continued to fall, with the latest data from the Australian Institute of Health and Welfare showing that fewer Australians are smoking than ever before—now down to 5.8 per cent for adults—and that vaping rates have stabilised, but smoking remains the leading cause of preventable death and disease in Australia.
I saw recently, in the Daily Telegraph, reports on the dangerous chemicals found in five types of illicit cigarettes that they sent for lab testing: pesticides; cadmium, a heavy metal and carcinogen; and more nicotine than the label indicated. Similar results were found by researchers from the University of Auckland. Their tests found higher concentrations of several harmful substances in illicit tobacco, including cadmium.
The levels were up to 60 per cent higher in the illicit tobacco tested than in legitimate tobacco products. The study also identified unusual levels of metals, including tin, lead, indium, caesium and uranium. These findings are concerning and demonstrate the potential additional health risks posed by illicit tobacco products.
Tobacco itself contains around 7,000 chemicals, with more than 70 known to cause cancer. Whether sold legally through a licensed retailer or illegally as counterfeit or unbranded tobacco, all tobacco products pose serious health risks. Illicit tobacco isn't regulated, and tests have demonstrated that they contain additional harmful ingredients, so the health risks are real.
But there are clearly broader risks beyond the health to our community by the illicit tobacco trade. This bill is designed to turn things around. Actually, I'm wrong in saying that because we've already taken many steps to change the dynamic for those who are trading in illicit tobacco.
What will change specifically in this bill? It will modernise the illicit tobacco enforcement framework to increase deterrence, strengthen supply chain integrity and support more prosecutions. Right now, a prosecutor has to prove that tobacco has been imported by a person with intent to defraud the government for that revenue.
The prosecution has to show that the person was aware that the tobacco was subject to a duty collection framework and that duty should be paid on importation. But knowing this bar, knowing that it was quite a technical term, organised crime have been able to distance themselves from the importation process. So with the scale and the complexity and sophistication of the organised crime groups, we are looking at a new approach.
This new framework will make it easier to hold those involved in illicit tobacco operations accountable, and will improve the ability of law enforcement agencies to pursue serious offenders. What's different is that there will be a list of observable indicators of illicit activity. It won't be subjective.
If any one of these indicators is established then that will be taken to satisfy the reasonable suspicion test for a criminal offence. It will allow enforcement agencies to focus on what they can observe and what is factual, rather than trying to prove every detail of a concealed illicit supply chain. Some of the things that will be considered are whether the packaging is compliant or non-compliant retail packaging—something that is observable; whether there are non-compliant tobacco products like menthol cigarettes hiding in plain packaging—again, observable; whether tobacco has been concealed to avoid detection; whether there is missing import invoices or paperwork; or if there is a very easily observable fact, the tobacco sale price is below the excise and the GST combined,—that fact alone establishes a reasonable suspicion that it is an unlawfully imported product.
This observable list will provide a powerful tool for the Australian Border Force and all state and territory police forces to go after serious and organised crime. In fact, anyone involved in the illegal tobacco and vape trade is on notice. Australian Border Force or state and territory law enforcement agencies will be able to enter retail premises and establish any of those facts.
If they can establish those facts, then action can be taken. While the focus will be on using the new offences to go after serious criminals, it is very clear it will now also be easier for law enforcement to target those operating retail businesses that possess illicit tobacco. It might be a tobacconist company, a warehouse company, a distributor, a transporter, a logistics company.
They are also subject to these rules, can be investigated and, if found that there is reasonable evidence, prosecuted, so anyone involved in the illegal tobacco and vapes trade would be wise to take note of this legislation. Another thing this bill does is introduce stronger consequences for the most serious forms of offending, ensuring that organised criminals who engage in conduct at that most serious end of the spectrum receive a sentence that is appropriate to the gravity of their crime.
The bill also helps reinforce the seriousness with which Australia treats prohibited tobacco imports, ensuring that criminals cannot avoid meaningful consequences simply because enforcement is focused on a complex question around duty evasion rather than the more commonsense approach that this is an illegal product being imported. The breadth of these reforms will mean a 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.
One of the other measures in this bill closes an important legal loophole that affects tobacco when customs duty has been paid. This relates to tobacco that would otherwise be offered duty free for people eligible to purchase that as they leave the country. The current framework means that there is no customs control, and that creates an opportunity for diversion into the black market at duty-free prices.
So this bill reduces the opportunities for diversion and ensures appropriate oversight of these products through the supply chain. If you're a legitimate duty-free operator, these reforms pretty much formalise the existing expectations and the way that you work, so little will change. It's aimed not at imposing new burdens on businesses that already handle these products responsibly but at ensuring that the opportunities for diversion to the black market are closed off.
There are also measures in this bill to streamline the seizure and disposal of illicit tobacco. Right now, in many states, we are seeing large seizures of illicit tobacco. Each month records are being broken, and it is on a scale that we haven't seen before.
Officers can spend hours and hours documenting and processing individual seizure notices in a very old fashioned way. This is time that could be used to locate more illicit supplies rather than doing the paperwork. The reforms in this bill will enable faster and more efficient seizure and disposal processes.
Another measure contained in the bill, which is a comprehensive way of changing how we chase these criminals and make them pay the price for the crimes that they have been committing, has to do with the integrity across the customs supply chain. Illicit tobacco operators often rely on people who are facilitating the process—their intermediaries. They are part of the process but not necessarily easily identifiable.
This bill introduces additional licensing conditions for customs brokers and customs oversighted depots and warehouses to ensure that they refrain from conduct that facilitates, assists or enables the importation of prohibited tobacco products. They are licensed and this imposes a positive obligation on the licence holder to take all reasonable steps to prevent such conduct occurring within their operations.
Taken together, all these reforms strengthen offences, tighten controls over the tobacco supply chain, elevate the seriousness with which illegal tobacco activity is treated, improve enforcement outcomes and increase the accountability across critical points of the importation process. The second part of this bill is about strengthening Australia's proceeds of crime framework so that criminal groups can't retain the financial benefits that they generated from unlawful activity.
It strengthens the ability of agencies to strip criminals of the profits they're making from illegal activities. That component of the bill applies to much more than just tobacco; it's modernising the proceeds of crime regime. The final part in ensuring that crime doesn't pay is that 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 capture property owned or controlled by a person at any time. Together, they will better equip law enforcement agencies to identify, restrain and recover the financial rewards that make organised criminal activities attractive in the first place. This changes the way the law operates so that we stop criminals from being able to get away with things they've been able to get away with for far too long.