New national taskforce to target illegal tobacco

The Illicit Tobacco National Disruption Group (ITNDG) will specifically focus on mid-level criminals within the small business, retail, delivery, and property sectors. Rather than replacing the existing Illicit Tobacco Taskforce ITTF), the new taskforce enables the ITTF to hone its work on larger criminal syndicates and the international connections enabling the trade.

The federal agencies who have joined the ITNDG include the Department of Home Affairs, The Australian Federal Police, AUSTRAC, Australian Criminal Intelligence Commission, Australian Taxation Office, Department of Health Disability and Ageing (including the Therapeutic Goods Administration), Department of Agriculture, Fisheries and Forestry, Illicit Tobacco and E-Cigarette Commission and Services Australia.

The new national taskforce, set up using part of the $188.5 million in funding already assigned to tackle illegal tobacco in Australia, represents a massive investment of taxpayer money and resources from multiple agencies.

According to research conducted by The Australian National University (ANU), smoking kills 66 Australians every day on average, or 24,000 people each year. Furthermore, the Public Health Association Australia (PHAA) estimates that smoking costs the nation about $159.7 billion in health and social losses.

Associate Professor Raglan Maddox is a Fellow and Study Director of the Tackling Indigenous Smoking Study at the National Centre for Epidemiology and Population Health at The Australian National University. Raglan is also the co-convenor of the PHAA’s Alcohol, Tobacco and Other Drugs Special Interest Group.

He believes that to solve the health crisis posed by illicit tobacco, a comprehensive range of product price rises, media campaigns, regulation, stricter licensing, and accessible cessation programs are necessary.

“Stronger national coordination, licensing, enforcement, and advanced track-and-trace systems are required to help prevent ongoing tobacco related death and disease. The solution [to combat the illicit tobacco market] is to tighten supply controls and expand cessation supports,” he says.

That equates to “nationally consistent cost-recovery retailer licensing, funding inspections and joint operations, and coordinated enforcement with escalating penalties for offenders,” he says.

Further, he believes that “we need a national traceability system aligned with the World Health Organization’s Framework Convention on Tobacco Control Protocol, using unique product identifiers and supply-chain monitoring and assessment. We also need to maintain and scale up free, culturally safe quitting supports.”

Higher product price drives demand for illicit, cheaper products

The ATO reports that excise tobacco rates are approximately $1.5 per stick (under 0.8g) and $2,397 per kg (not in stick form or over 0.8g) from 1 September this year. The average price of a packet of 20-25 cigarettes is over the $50 mark. Under-the-counter cigarettes sell for around $25 a pack.

In 2018, 400 million cigarette sticks were seized at the border. In 2023, it was $1.7 billion.

While consumers pocket the difference, the cost to all Australians is enormous. Treasury had originally forecast that the federal government would raise $15 billion in tobacco taxes in the 2024 financial year but that was revised to $10 billion. One expert in criminology told the ABC that this shortfall was not the result of smoking cessation, but smokers turning to the black market.

Tackling the black market

On 12 March, the federal government announced a further $156.7 million over two years from 2025-26 to expand programs to tackle the illicit tobacco trade. That includes $19.9 million allocated to the Department of Home Affairs for the Office of the Illicit Tobacco and E‑Cigarette Commissioner (ITEC), under interim ITEC Commissioner Erin Dale (before Amber Shuhyta took on the role on 1 July). An additional $1.4 million was allocated to establish a new collaboration for a regional assessment of illicit tobacco markets, in partnership with international experts. The ITEC was established in July 2024.

This isn’t the first collaborative taskforce designed to combat the illicit tobacco trade. The Illicit Tobacco Taskforce (ITTF) was established in July 2018 as Australia’s premier multi-agency Commonwealth enforcement response to combat illicit tobacco. The ITTF combined forces from the ATO, Australian Border Force, Department of Home Affairs, Australian Criminal Intelligence Commission, Australian Transaction Reports and Analysis Centre, Commonwealth Director of Public Prosecutions and other law enforcement agencies.

In its first three years of operation, the ITTF detected and seized over 264 tonnes of illicit tobacco and over 540 million cigarettes, estimated to have an excise value of over $870 million. Some of the illicit tobacco is grown in Australia, but according to the Australian Criminal Intelligence Commission, most of the illicit tobacco comes from China, Indonesia, the United Arab Emirates, Malaysia, Singapore, and the Philippines.

The Australian Criminal Intelligence Commission’s 2016 report claims the shipments were coming through varied transit countries with “no discernible pattern.”

Traders largely escaping prosecution

A 2020 Parliamentary Inquiry identified that one pathway to combatting illicit tobacco in Australia is through increased prosecution of illicit tobacco retailers. The ABF and ATO have primarily focused on syndicates, allowing those distributing the products to consumers to avoid penalties. The current maximum federal penalty for selling illicit tobacco products is up to 10 years’ imprisonment and/or a fine of up to $412,500, or both, depending on the specific offence. For commercial possession or sale, the maximum penalties can be even higher, with fines of up to $1.54 million and/or seven years imprisonment.

NSW has long fallen behind on regulation

Cigarette retailers are regulated by NSW Health through a tobacco licensing scheme that began on 1 July 2025. Retailers and wholesalers must have a licence to sell tobacco and non-tobacco smoking products, with an application process through Service NSW. There are strict laws regarding sales to minors, advertising, and the display of health warnings. The maximum penalties for a range of tobacco retailing offences have increased, including selling tobacco not in the required packaging or without mandatory health warnings, which now carries a maximum penalty (as of October 2025) of up to $154,000 for individuals and $770,000 for corporations.

According to NSW Health, from 1 April to 30 June this year, 35,998 illegal vaping and nicotine products were seized and destroyed. This is a significant decrease from the same period in 2023, in which 100,629 products were seized.

The number of tobacconists is now 19,500, up from 14,500 four years ago, according to NSW Health data. States with licensing regimes have significantly fewer retailers: South Australia has 1,650 licensed tobacco retailers while Western Australia has 3,155.

Patrick Schmidt is a partner at Kells the Lawyers. He spent seven years with the NSW Police Force as a senior prosecutor and relieving area prosecutor commander in the Sydney and the Specialist Courts Command before joining Kells in 2019.

He says, “[t]he criminals follow the cash. If you look at criminal underbelly in Sydney, there’s more of them competing for a lesser share, whereas in Victoria the larger criminal elements, or gangs, have a bigger slice of the pie. The level of competition in Sydney is so high, especially with so many [tobacconist] stores.”

He adds, “[b]eing caught with tobacco, as opposed to being caught with cocaine, heroin, (or) one of the other drugs, comes with reduced risks because the sentences aren’t as big and the stigma for being caught (isn’t) as much.”

Schmidt refers to a recent Commonwealth case, YZ v R [2025] NSWCCA 165, in which a man appealed his three year sentence after being arrested for carrying a truckload of tobacco (666kgs) – including cigarettes, hookah nicotine, and vapes – and ultimately he received no prison time. The excise duty on that amount of tobacco would have been approximately $999,000.

The charges he faced could have resulted in over 15 years’ imprisonment for possession of tobacco 500kg or above (Sch 1 cl 308-10(1) of the Taxation Administration Act 1953 (Cth)), and for possession of tobacco knowing that the goods were imported with intent to defraud the revenue (section 233BABAD(2) of the Customs Act 1901 (Cth).

Schmidt posits that a few major busts, each equating to $1 million in excise, could justify the $188.5 million cost of this new taskforce, especially when policing over 19,500 tobacconists in NSW alone is unfeasible. He describes this as “a drop in the ocean” of possible busts.

“There’s going to be cross-jurisdictional issues,” he says.

He continues, “[h]istorically, departments don’t like to play together. Because it’s an excise duty concern in terms of criminality, much like medicinal marijuana, it will always be a Commonwealth case as a tax issue.”

In July 2019, the Australian Government strengthened regulations on the tobacco importation process, requiring individuals or organisations importing tobacco or tobacco products to apply for a permit issued by the Department of Home Affairs. Rather than permission to store tobacco in licensed warehouses prior to paying customs duty, the Customs (Prohibited Imports) (Importation of Tobacco Products) Approval 2019 (Cth) requires duties and taxes to be paid upon arrival to the Department of Home Affairs, including the Australian Border Force Division (Home Affairs).

Penalties need toughening

A 2020 Parliamentary Joint Committee on Law Enforcement Report on illicit tobacco investigated the motivations and obstacles for individuals taking part in the illegal trade. The threat of seizures did not impede the trade, whereas fine and jail times for individuals reduced the attraction to be involved in the trade, thus reducing the available workforce and increasing the cost to the suppliers, as well as the market price of the product.

According to Tobacco in Australia (team based at Cancer Council Victoria, producing reports and research into reducing the enormous harms caused by smoking), the costs for the supplier to be involved in the illicit tobacco market include:

• direct costs such as money required to bribe officials or other operators in the illicit trade;
• opportunity costs such as salary forgone from other possible employment and other potential use of capital (growing land, equipment, factory space, boats and the like); and
• judgment about the probability of detection in relation to the magnitude of penalties and social opprobrium of being prosecuted.

Last month, two Sydney men pleaded guilty to all charges, and were sentenced for importing and distributing more than 10.6 million illicit cigarettes with an estimated duty evasion of over $13 million. On 12 September, a 63-year-old was sentenced to two years and nine months imprisonment, and a 35-year-old man received 18 months, to be served in the community. This was lauded as a major result for the ITTF, which began investigations in early 2022, focusing on a transnational, organised crime group importing and distributing illicit tobacco. The 63-year-old man was present at the time of the warrants, was arrested and charged with the importation of tobacco products with the intention of defrauding the revenue, contrary to section 233BABAD(1) of the Customs Act 1901 (Cth).

Arguably, the cost of a multi-agency, multi-year investigation, arrest, and trial that resulted in less than three years in prison for either of the two men seems disproportionate in terms of taxpayer investment.

Schmidt says, “I think the ultimate game here is commerce. Especially with the criminal gangs, if there’s a demand, the criminals will make a supply. And not only that, it’s risk averse. [Tobacco] is a legal product seen in a lesser light, resulting in lesser penalties to be caught with it.”

The success of ITNDG ultimately rests with the cross-agency delineation and whether the courts make use of the new maximum sentences.