The Albanese government is moving to make it dramatically easier to prosecute businesses and organised crime figures dealing in illicit tobacco, allowing suspiciously cheap cigarettes, illegal packaging and concealed stock to be used as evidence that products have entered Australia unlawfully.

The new federal legislation, being introduced to Parliament on Thursday, is designed to close what law-enforcement agencies say is a major weakness in existing customs offences.

Under the current framework, authorities can face the difficult task of proving that somebody possessing or moving imported tobacco knew it had entered Australia illegally and with an intention to evade customs revenue.

The reforms would allow prosecutors to rely more heavily on the circumstances surrounding the tobacco itself.

A packet being sold for less than the excise and GST that would apply to a lawful product could become one warning sign.

So could cigarettes sold in packaging that breaches Australia’s plain-packaging requirements, banned products such as particular menthol variants, a lack of invoices or import documentation, or stock deliberately concealed from authorities.

Rather than every prosecution turning on proving what a retailer or distributor personally knew about the original importation, authorities could point to a combination of facts that would cause a reasonable person to suspect the tobacco was illicit.

Assistant Minister for Customs Julian Hill says the change is intended to bring Commonwealth law into line with a black market that bears little resemblance to the relatively small-scale revenue fraud the legislation was originally designed to address.

“This is a major global problem, and Australia’s not immune,” Hill told ABC Radio on Thursday.

He said enormous volumes of cigarettes could be produced overseas for less than $1 a packet before being pushed across national borders by sophisticated organised crime groups.

The target is no longer just the smuggler at the border

The proposed offences would distinguish between the importation of illicit tobacco and its later possession or movement inside Australia.

That matters because Canberra’s tobacco strategy has increasingly shifted towards attacking the entire supply chain.

Authorities may intercept a shipping container at the border, but criminal networks also need warehouses, drivers, wholesalers, shopfronts, payment systems and people willing to sell the product.

Hill said the new framework would make it easier to pursue not just senior organised crime figures but companies, tobacconists, distributors and warehouse operators involved further down the chain.

His warning to people involved in the trade was blunt: find another job.

The change also recognises a practical enforcement problem.

An illegal packet of cigarettes can travel through numerous hands after entering Australia.

By the time it reaches a suburban shop, proving exactly what the retailer knew about the original importation can be far more difficult than proving that the product itself is obviously inconsistent with Australia’s legal tobacco market.

A store selling branded overseas cigarettes for a fraction of the tax alone attached to a legitimate Australian pack may therefore face much greater scrutiny under the proposed regime.

Government wants the criminals’ money as well as convictions

The legislation would also strengthen proceeds-of-crime measures.

Investigators would receive broader powers to obtain documents, while changes would make it more difficult for alleged criminal operators to protect assets from confiscation.

Hill has repeatedly argued that prosecuting an illicit tobacco offence is only one part of disrupting an organised crime business.

The greater deterrent, he says, may be taking away the profit.

That can mean cash, vehicles, property, bank accounts and other assets authorities allege are connected with criminal activity.

The approach reflects how the tobacco problem has changed.

For years, illicit cigarettes were primarily discussed as lost tax revenue and a public-health problem.

Governments now increasingly describe the trade as an organised crime economy capable of financing money laundering, drug trafficking and violent competition between criminal groups.

AUSTRAC has warned banks about suspicious financial activity associated with tobacconists and convenience stores, including the use of cash, merchant facilities and private ATMs to move or disguise proceeds.

Recent investigations illustrate why authorities are focused on money flows.

In August, a multi-agency strike team announced it had disrupted two alleged networks valued at $80 million following investigations into the importation of illicit tobacco and vapes through trusted insiders.

Another Northern Territory investigation identified more than $9 million in alleged proceeds linked to illicit tobacco and vaping activity.

The latest laws build on a crackdown already passed this year

Thursday’s move is not the government’s first major illicit-tobacco legislation in 2026.

Earlier this year Parliament dealt with the Combatting Illicit Tobacco Bill, a separate package increasing penalties and strengthening investigative powers against serious tobacco offending.

Those reforms increased penalties across importing, possessing, buying, selling, supplying, producing and manufacturing illicit tobacco.

They also expanded unexplained-wealth and proceeds-of-crime mechanisms and allowed law-enforcement agencies to seek stronger telecommunications surveillance powers for qualifying serious tobacco offences.

Some offences can now attract maximum imprisonment terms of up to 15 years.

The latest proposal tackles a different problem: making the underlying offence easier to establish when the circumstances strongly indicate that cigarettes or tobacco are illegal.

The two approaches are designed to work together.

One increases the consequences and investigative tools available once serious criminal conduct is identified.

The other attempts to prevent cases failing because prosecutors cannot prove precisely what somebody knew about how a packet of cigarettes originally crossed the border.

The scale of Australia’s illicit market is extraordinary

There is little disagreement in Canberra that the existing market has become enormous.

The federal Illicit Tobacco and E-cigarette Commissioner estimated illicit tobacco represented between 50 and 60 per cent of Australia’s tobacco market in 2024–25.

The estimated market value was between $4.1 billion and $6.9 billion, with potential tobacco excise evasion estimated between $7.7 billion and $11.8 billion.

More recent experimental work by the Australian Bureau of Statistics paints an even more concerning picture of the broader nicotine market.

The ABS estimated illicit sources supplied around 80 per cent of total nicotine consumed in Australia during 2025.

That figure requires an important qualification.

It refers to overall nicotine consumption and includes the expanding illicit market in products such as vapes, rather than establishing that exactly 80 per cent of conventional cigarettes sold in Australia were illegal.

The ABS also estimated total nicotine consumption had increased by almost 40 per cent since 2017 even as legal tobacco consumption fell to less than one-third of its 2017 level.

That suggests substitution into cheaper illicit products has increasingly undermined reductions in the legal market.

Border Force is seizing tobacco on an industrial scale

The numbers being intercepted at Australia’s borders demonstrate the extraordinary scale of supply.

During the 2025–26 financial year, the Australian Border Force said it seized more than 2.2 billion cigarette sticks and 586.7 tonnes of loose-leaf tobacco at the border.

It also intercepted more than 13.2 million illicit vaping products.

The tobacco alone represented estimated duty evasion exceeding $4.7 billion, excluding GST.

Domestic operations accounted for another 109.4 million cigarettes and more than 32 tonnes of loose tobacco.

In August, authorities seized 3.4 million cigarettes during an operation targeting an alleged transnational network with suspected links to 112 containers of illicit tobacco.

Another coordinated operation across Western Australia and the Northern Territory this month seized more than 1.77 million cigarettes, 504 kilograms of loose tobacco and more than 9,500 vaping devices.

The same operation also uncovered four kilograms of MDMA, demonstrating the overlap authorities say can exist between illicit nicotine markets and other criminal activity.

Record seizure figures can be read in two ways.

They show law enforcement detecting enormous quantities of illegal product.

They also reveal just how much product criminal organisations are prepared to send towards the Australian market.

Why Australia has become so attractive to illicit sellers

Price is an unavoidable part of the explanation.

Australia deliberately made cigarettes extremely expensive as a public-health measure.

High excise increases the cost of smoking and has historically been one of the most effective tools used to encourage smokers to quit and discourage young people from starting.

But the enormous gap between the price of legal and illegal cigarettes has also created an opportunity for criminals.

Hill himself acknowledged that reality in a speech in March.

He said high excise over the previous decade had contributed to the price differential that helped drive black-market growth and argued denying that link would be unrealistic.

His conclusion, however, was not that Australia should now slash the tax.

The government argues criminal supply chains have become so deeply established that reducing excise alone would not dismantle them.

Organised groups already have suppliers, logistics operations, distribution networks and retail outlets capable of selling extremely cheap product.

That has produced the sharpest political divide in Australian tobacco policy for years.

Coalition wants an 80 per cent excise cut

Opposition Leader Angus Taylor has promised an 80 per cent reduction in tobacco excise if the Coalition wins government.

The Coalition says the tax on a standard packet of 20 cigarettes would fall from roughly $30 to about $6.

If the tax reduction were passed through fully, it says legal cigarettes could again compete with black-market products.

The opposition package would also legalise, regulate and tax adult access to nicotine vapes and nicotine pouches, spend another $200 million on enforcement and provide $60 million for a public education campaign.

Taylor’s argument is that Australia’s legal market cannot defeat an illegal market while lawful cigarettes cost several times as much.

He says government policy has inadvertently handed organised crime one of the largest profit margins available in Australian retail.

One Nation has adopted a similar approach, promising a 75 per cent excise cut and a three-year freeze on indexation.

The two parties are now competing over who has the more effective plan to take customers away from illicit sellers.

Labor says a price war could create more smokers

Labor has chosen enforcement instead.

Health Minister Mark Butler argues sharply reducing the price of legal cigarettes risks reversing decades of public-health progress while offering no guarantee criminal groups will leave the market.

Illegal sellers could simply lower their own prices further.

Public-health organisations also warn that making legal cigarettes dramatically cheaper could encourage increased smoking, particularly among young people and price-sensitive smokers.

The Coalition disputes that argument, saying cheap cigarettes are already readily available through the black market and its proposal would move existing consumption back into a legal, regulated system.

That disagreement is likely to become a major election issue.

The government cannot credibly argue the current situation is acceptable.

The opposition cannot yet demonstrate that an 80 per cent tax cut would permanently eliminate an organised crime market with established international supply chains.

The real test is what happens at the shopfront

For ordinary Australians, the success of the latest legislation will not ultimately be measured by the wording of the Customs Act.

It will be measured in suburbs where illegal cigarettes can currently be bought openly.

Hill has previously said governments should not celebrate record border seizures while illicit tobacconists remain widespread in Australian communities.

That is why states and territories have increasingly introduced licensing systems, closure orders and tougher enforcement against retail premises.

Victoria’s strengthened closure powers came into effect this week, adding to aggressive compliance action already underway in jurisdictions including Queensland and South Australia.

The Commonwealth’s latest changes are intended to add another weapon by making it harder for a retailer or distributor to claim ignorance when the product, price and circumstances point overwhelmingly towards an illicit supply chain.

Australia is effectively testing two competing theories about how to reclaim its tobacco market.

Labor believes the answer is to make illegal trade progressively more dangerous, expensive and difficult through stronger prosecutions, asset confiscation, border operations and shop closures.

The Coalition and One Nation believe the legal price itself must be reduced dramatically so criminal sellers lose their enormous commercial advantage.

Both approaches begin from the same uncomfortable fact.

Australia’s illicit tobacco market has grown from a taxation and health problem into a multibillion-dollar organised crime industry.

Thursday’s laws are Canberra’s latest attempt to change the balance of risk for the people profiting from it.

Whether that is enough to shut down the cheap-cigarette economy will be a much harder test than getting another crackdown through Parliament.