Australia’s tobacco tax revenue is falling to its lowest point in a decade, projected to be just $4.9 billion in the 2025-26 fiscal year, nearly half the amount collected in 2019-20. This decline is primarily due to the prevalence of illicit cigarettes, which exceeded $4 billion in the black market in 2022-23 and generated an estimated $6.6 billion in revenue for criminal organizations. Medical professionals warn that cheap, contraband cigarettes on the streets are driving a resurgence in smokin
Key points:
- Financial Impact: Australia’s tobacco tax revenue continues to decline, with an expected decrease to around AUD 7.4 billion (approximately USD 4.9 billion) in 2025-2026, a sharp drop from the peak of AUD 16.3 billion (approximately USD 10.8 billion) in 2019-2020; the illegal tobacco market is estimated to be worth over AUD 6 billion (approximately USD 4 billion) in 2022-2023.
- Public Health Risks: The proliferation of illegal cigarettes has led to an increase in Australia’s smoking rate to a new high in over a decade, with the younger generation potentially becoming the first large-scale group of smokers in decades; long-term smokers report that illegal cigarette prices have dropped from AUD 60-65 per pack (approximately USD 40-43) from legitimate channels to AUD 15-20 per pack (approximately USD 10-13).
- The low prices are likely to encourage smoking behavior, and illegal tobacco is not regulated.
- Organized Crime: Organized crime groups profit approximately AUD 10 billion (approximately USD 6.6 billion) annually from illegal tobacco trading; driven by the demand in the underground tobacco market, crimes such as attacking rival tobacco shops and violent robberies at gas stations are increasing, posing a threat to societal security.
- Enforcement Interception Effectiveness: In the past year, only 285,000 illegal cigarettes were seized in the Australian Capital Territory, while illegal tobacco still accounts for half of the 2.7 million smoker market nationwide.
Australia’s tobacco tax revenue has halved in five years
According to a report by Sky News on September 23, 2025, the Australian federal government is facing its lowest tobacco tax revenue in years, primarily due to an increase in illegal cigarette sales.
It is anticipated that tobacco tax revenue will decrease significantly to around 7.4 billion Australian dollars (approximately $4.9 billion USD) in 2025-2026, compared to 12.6 billion Australian dollars (approximately $8.3 billion USD) in 2022-23 and the peak of 16.3 billion Australian dollars (approximately $10.8 billion USD) in 2019-20. At the same time, the Australian Taxation Office estimates that the illegal tobacco market was worth over 6 billion Australian dollars (approximately $4 billion USD) in 2022-23.
The illegal cigarette market is exceeding $4 billion
The medical community has issued a warning that the proliferation of illegal cigarettes in recent years has led to smoking rates reaching heights not seen in over a decade. The Australian Medical Association has noted a significant increase in unregulated tobacco on the streets, with the younger generation potentially becoming the largest group of mass smokers in decades. Kerrie Aust, president of the AMA Capital Territory branch, stated that many patients have reported being able to easily find cheap smuggled cigarettes. One long-term smoker mentioned, “I used to pay 60 to 65 Australian dollars (about 40-43 US dollars) for a pack; now it only costs 15 to 20 Australian dollars (about 10-13 US dollars).
Organized Crime
According to data from border law enforcement agencies, just in the past year, over 285,000 cigarettes were intercepted in the Australian capital region. Despite this, illicit tobacco still accounts for half of the market of 2.7 million smokers nationwide.
Illegal tobacco not only leads to an increase in smoking rates but also provides substantial income for organized crime. According to the latest data, criminal groups make approximately 10 billion Australian dollars (about $6.6 billion USD) annually from it. Due to high tobacco taxes and the ban on flavored cigarettes, market demand has shifted towards underground trade, resulting in a chain reaction, including attacks on rival tobacco shops and violent robberies at gas stations.
Enforcement Interception Effectiveness
Despite the federal government planning to generate over 7 billion Australian dollars (approximately $4.6 billion USD) in revenue from tobacco taxes in the current fiscal year, tobacco tax revenue has decreased by half since 2019. Dr. Aust warned that tobacco smuggling poses a threat to public health. “Especially for young people, smoking has significant long-term health effects such as cancer and heart disease. We cannot allow smoking rates to rise again,” she said.
