Customs and Other Legislation Amendment (Illicit Tobacco Enforcement Modernisation and Other Measures) Bill 2026
Ms PENFOLD (Lyne) (15:37): I rise to speak on the Customs and Other Legislation Amendment (Illicit Tobacco Enforcement Modernisation and Other Measures) Bill 2026. The coalition will not oppose this bill. We support sensible measures that give the Australian Border Force, the Australian Federal Police and other agencies stronger tools to intercept illegal tobacco, prosecute offenders and confiscate their criminal profits.
But this legislation is not a comprehensive solution to Australia's illicit tobacco crisis. Australia's illicit tobacco trade has become a multibillion-dollar organised crime industry. It is linked to extortion, intimidation, firebombings and violence.
It undermines public health, deprives Australians of billions of dollars in revenue and damages legitimate small and family businesses. Convenience stores, newsagencies and service stations are already struggling with higher power bills, insurance premiums, rents, wages and supply costs. They obey the law, pay their taxes, employ local people and support their communities.
Yet they are forced to compete with criminal enterprises that pay no excise, ignore packaging and licensing requirements and sell illegal products at a fraction of the lawful price. That is not fair competition. It is a displacement of legitimate businesses by organised crime.
In my electorate of Lyne, an illegal tobacco shop operated two doors down from my electorate office. It was raided, and is now closed. I welcome that action, as do legitimate local retailers.
Another one was another two doors down the road. The fact that it could operate so openly illustrates the brazenness with which this trade has spread. These businesses are not hidden in back alleys.
They operate in ordinary shopping strips beside retailers doing the right thing. I found another one only yesterday in North Haven. It's very easy to spot them.
With the purple and all the windows covered, it's very easy to know that it's an illegal tobacco shop. Every illegal outlet allowed to remain open sends a terrible message to the honest retailer down the road: 'You carry every cost of compliance while the criminal business undercuts you and appears to operate with impunity.' The scale of this crisis is staggering.
The Illicit Tobacco and E‑cigarette Commissioner estimated that illicit tobacco represented between 50 and 60 per cent of tobacco sold in Australia in 2024-25. The illicit market is estimated to be worth between $4.1 billion and $6.9 billion annually. Estimated excise and customs duty evasion is between $7.7 billion and $11.8 billion.
The Australian Bureau of Statistics found that nicotine consumption increased by almost 40 per cent between 2017 and 2025, with most of that increase occurring after 2021. Legal tobacco sales have collapsed, but nicotine consumption has increased. Too many customers have moved into the illegal market.
This bill contains six schedules addressing different parts of the enforcement framework. Schedule 1 creates new offences for importing, possessing or conveying unlawfully imported tobacco products. It also establishes an aggravated offence for more serious conduct, including offending involving larger quantities.
The bill introduces objective and observable circumstances that can establish a reasonable suspicion that tobacco was unlawfully imported. These can include an implausibly low price, non-compliant packaging or health warnings, missing required markings, or an inability to demonstrate a lawful source and supply chain. These changes should make it easier to act against distributors, warehouse operators and retailers dealing in clearly illegal tobacco.
Schedule 2 provides for unlawfully imported tobacco to be prescribed as a tier 1 good under the Customs Act. That recognises that illicit tobacco is no longer simply a revenue compliance issue. It's a high-risk, organised crime commodity causing serious economic and community harm.
Schedule 3 addresses duty refundable tobacco. This includes tobacco supplied to duty-free operators for export or sale to eligible travellers. Schedule 4 streamlines the seizure, forfeiture and disposal of illegal tobacco.
The sheer volume of illegal tobacco being intercepted has imposed a substantial administrative burden on frontline officers. Officers can spend hours processing individual seizures rather than examining cargo or investigating criminal networks. The bill should allow products to be seized and destroyed more efficiently and prevent offenders from misusing administrative claim procedures to delay their disposal.
Schedule 5 strengthens licensing arrangements for customs brokers, depots and licensed warehouses. These provisions recognise that organised crime depends upon access to warehouses, freight networks, customs expertise and apparently legitimate commercial infrastructure. Schedule 6 amends the Proceeds of Crime Act 2002.
It strengthens production-order provisions used to obtain documents during investigations, changes pecuniary penalty arrangements to improve the recovery of criminal benefits and clarifies how total wealth is calculated in unexplained-wealth proceedings. These are worthwhile measures. Confiscating a shipment, though, is not enough.
Authorities must be able to identify the people directing the enterprise, follow the money and recover the assets obtained from and through criminal activity. That is why the coalition will not stand in the way of this bill. But these measures are directed primarily at enforcement after illegal tobacco has entered the supply chain.
The bill does not confront the price differential making the illicit market so profitable. It does not contain the coalition's proposed $200 million enforcement surge, establish a regulated adult market for alternative nicotine products or fund a comprehensive national education campaign. Nor does it adequately address the movement of illicit tobacco sales online.
An ABC investigation found dozens of websites advertising cheap tobacco and vapes from what appeared to be ordinary online stores. Reporters purchased a carton of illegal cigarettes for $150—around one-third of the equivalent legal price. They paid by bank transfer, communicated through WhatsApp, received an Australia Post tracking number and had the cigarettes delivered within three business days.
The Australian Association of Convenience Stores has warned that Australia Post's network is being exploited to distribute illegal tobacco. Australia Post cannot reasonably inspect every parcel, and responsibility should not fall on local postal workers, delivery drivers or licensed post office operators. Indeed, licensed post office operators have raised concerns about Australia Post's corporate leadership increasingly orientating the business around parcel delivery.
If parcel delivery is central to Australia Post's commercial future, its corporate leadership must accept the responsibilities accompanying that strategy. Its leadership has an obligation to ensure its systems and infrastructure are not exploited to help criminal gangs distribute illegal tobacco. The bill's new conveyance offences apply to corporations as well as individuals.
The minister has expressly said that transport and logistics companies may be investigated and prosecuted. However, the bill does not make Australia Post automatically liable when illegal goods are concealed in a parcel, nor does it appear to impose on Australia Post a specific obligation to identify and report suspicious consignments. The government should clarify how the conveyance offences would apply if a transport corporation became aware that its network was being systematically exploited but failed to respond appropriately.
Australia Post should be working closely with the ABF, AFP, AUSTRAC, Therapeutic Goods Administration and state police to identify repeat bulk senders, false sender information, suspicious parcel volumes and accounts linked to illegal tobacco websites. We need action against the whole online operation—the website, the messaging account, the payment facility, the warehouse, the sender and the criminal profits.
Organised crime is commodity agnostic. These syndicates do not care whether their profits come from tobacco, vapes, alcohol, drugs, stolen vehicles or extortion. They follow the money.
In Victoria, the threats, firebombings, rammings and extortion associated with the tobacco wars are now being seen in attacks on bars, nightclubs, restaurants and liquor businesses. Police raids associated with so-called alcohol wars have uncovered illegal tobacco, cash and weapons. There are also reports of sophisticated criminal syndicates stealing Australian vehicles and sending them offshore in shipping containers.
We should not claim without evidence that every one of these crimes is controlled by a single organisation, but networks developed to import and distribute illicit tobacco can use the same warehouses, transport routes, money-laundering arrangements, encrypted communications and criminal facilitators for other commodities. There is an even more disturbing potential national security dimension.
Kazem Hamad, an alleged offshore leader associated with Victoria's illicit tobacco wars, was deported to Iraq and accused of continuing to direct criminal operations affecting Australia. Public reporting has linked criminal intermediaries associated with his network to activity allegedly directed by Iran's Islamic Revolutionary Guard Corps. These serious allegations must be expressed carefully.
They do not establish that Iran controls Australia's illicit tobacco trade. They do, however, demonstrate the risk created when violent, well-financed criminal networks become entrenched and are potentially available to foreign state actors. This is therefore an organised crime and border security challenge with potentially broader national security consequences.
That makes recent reports about Australian Border Force deeply concerning. Former senior officers have described the Illicit Tobacco Taskforce as an underresourced operation too focused on seizure numbers and insufficiently equipped to dismantle criminal networks. They have alleged that experienced personnel have left, investigations have been abandoned and intelligence gathering capability is inadequate.
The ABF disputes any suggestion that its operational capability has been diminished, but this parliament cannot ignore these warnings. A new offence will not inspect a container. A higher penalty will not conduct surveillance, trace criminal money or prepare a complex prosecution.
The powers in this bill must be backed by experienced officers, intelligence capability, modern technology and secure, long-term funding. The government must also confront the policy settings making this market extraordinarily profitable. In the 2023-24 budget, the Albanese government imposed an additional five per cent tobacco excise increase in each of the three successive years, on top of twice-yearly indexation.
The government forecasts an additional $3.3 billion in revenue. Instead, tobacco revenue fell dramatically as consumers moved into the illicit market. Reducing smoking remains an important public health objective, but responsible government requires examining the real world consequences of policy, nor should we simply blame individual consumers, particularly people struggling with addiction and severe cost-of-living pressures.
Responsibility lies with the criminals who are exploiting them and with a government that is refusing to confront the price differential that is sustaining this market. This is where the coalition's policy differs fundamentally from the government's bill. The bill strengthens powers to pursue offenders within an illicit market that is already deeply entrenched.
The coalition proposes to attack the commercial foundations of that market. Our policy includes an 80 per cent reduction in tobacco excise, reducing the excise component of a standard packet of 20 cigarettes from around $30 to approximately $6, with the rate reviewed after two years. The purpose is not to encourage smoking.
Smoking is harmful, and we must continue to help Australians quit. The purpose is to collapse the extraordinary price advantage enjoyed by organised crime and return consumers to a lawful regulated market. The coalition would support that reform with a $200 million nationwide law enforcement blitz, delivering more raids, arrests, seizures, investigations, shop closures and border disruption.
We would establish a legal, regulated and taxed adult market for nicotine vapes and nicotine pouches, with strong protections for children. We would also invest $60 million in a national education campaign exposing the organised crime behind illicit tobacco and reinforcing the dangers of smoking and nicotine addiction. The government's bill changes enforcement laws.
The coalition's policy combines enforcement, tax reform, regulation, education and demand reduction. The success of this legislation will be measured by its results: whether illegal shops close and stay closed, whether online distribution is disrupted, whether criminal assets are confiscated, whether syndicates are dismantled and whether legitimate Australian businesses can once again compete fairly.
Australia must not become a country where obeying the law places a business at a competitive disadvantage. We must stand with our law enforcement officers, licensed post office operators, legitimate retailers and communities threatened by this trade. The coalition supports the practical improvements contained in this bill, but we will continue to press for the comprehensive policy needed to destroy the illicit tobacco business model rather than merely managing the consequences of its continued growth.