Treasurer Jim Chalmers has ruled out a review of taxes on cigarettes, following a push from NSW Premier Chris Minns.
All cigarettes sold in Australia have a tobacco “excise” (tax) applied to them.
Earlier this week, Minns argued that reducing the tax on cigarettes would help crack down on the illegal tobacco trade in Australia.
Chalmers pushed back, saying it’s “not the answer” to black-market concerns.
Here’s what to know.
Tobacco excise
The Federal Government has taxed tobacco since 1901, making it one of the longest-standing sources of its revenue.
In 2023, the government introduced twice-yearly indexation of the price of tobacco products, on top of a 5% annual increase. Indexation is when the cost of a good or service is changed to reflect the value of money.
Currently, a single cigarette is taxed at $1.40.
Every kilo of loose tobacco has a $2,158.65 levy applied to it.
The taxes on tobacco apply to products sold across Australia.
In 2019/20, before vaping boomed in popularity, the Government earned $16.3 billion in tax revenue from the excise.
In 2025/26, the Government’s budget documents project it will earn $7.4 billion.
Over the next four years, the government is set to earn $6.9 billion less than expected from the excise.
Chalmers has attributed the drop to two factors: fewer smokers and growth in underground tobacco trade.
Your contribution ensures The Daily Aus can continue doing the work you love.
I want to give $10 monthly to help TDA keep doing the news.
Your details:
Illegal trade
Authorities have warned of a growing tobacco black-market in Australia.
In May, NSW launched an inquiry into the illegal tobacco trade in the state, including organised crime links to tobacconists.
The federal government set aside $160 million over two years to crack down on illegal tobacco products.
Earlier this week, federal police announced they had arrested a man alleged to have illegally imported 20 million cigarettes from the United Arab Emirates.
NSW Premier
NSW Premier Chris Minns floated the idea of reducing taxes on cigarettes as a way of stamping out criminal trading.
While noting the tobacco tax has helped reduce smoking rates, Minns said: “The massive increase has exploded the illicit tobacco marketplace.”
“Many people who wouldn’t go near illegal behaviour ordinarily are buying illicit tobacco almost on a daily basis”.
He flagged that extra police resources dedicated to tackling illegal tobacco would impact the state budget, to be handed down on 24 June.
Federal response
In response, Chalmers ruled out changes to the tobacco excise, saying cheaper cigarettes aren’t “the answer” to concerns about illegal trading.
“More people are giving up the darts, but more people are also doing the wrong thing,” Chalmers admitted.
“I’m not convinced that cutting the excise on cigarettes would mean that that would be the end of illegal activity.”
Following the Treasurer’s comments, the NSW Opposition said Minns’ “solitary idea” to address the issue had failed.
