Australia’s tobacco wars have become a national organised crime crisis.
Today, the Coalition launches a major law and order policy to crush the organised crime gangs that are making billions from illegal cigarettes and vapes. Our plan will stop the firebombings, extortion, and violence on Australian streets which is helping to fund drug trafficking, scams, and money laundering.
In Victoria alone there have been almost 200 tobacco-related arsons and six homicides directly linked to the trade.
The Government estimates organised crime groups are making between $4.1 billion and $6.9 billion in profit from illicit tobacco, money that is simply ploughed back into trafficking, scams and money laundering.
At the centre of the Coalition’s plan will be an 80 per cent cut to tobacco excise, and the legalisation, regulation, and taxation of vapes and nicotine pouches for adults, backed by a $200 million nationwide law enforcement surge to shut illegal shops, intercept illegal tobacco, and dismantle the criminal networks behind the trade.
The Coalition will attack the source of the problem by taking away the extraordinary profits that organised crime are making by selling illegal tobacco and vapes.
The Leader of the Opposition, the Hon Angus Taylor MP said this is a national law and order crisis that needs to be confronted head-on.
“Organised crime is waging a campaign of economic terrorism on Australians,” Mr Taylor said.
“They’re making billions from illegal tobacco and vapes, using those profits to fund firebombings and killings on our streets, while expanding their criminal empires into drug trafficking, scams and money laundering.
“This isn’t just a black-market tobacco problem. It is a major organised crime business that is making our streets less safe and ripping billions of dollars from taxpayers.
“Our strong plan will attack the gangs where it hurts by taking away their massive price advantage, taking away their customers, and taking away their profits.
“You don’t bring organised crime to its knees by protecting its business model. You have to destroy the business model, and that’s what the Coalition’s policy will do.
“Tobacco consumption has gone up around 30 per cent since the end of 2021 while taxes have kept rising, clearly showing that the Government’s current approach has failed.
“Australians are getting the worst of all worlds: tobacco consumption is up, criminals are controlling most of the market, and taxpayers are losing billions in revenue.”
“Labor has allowed a criminal industry to thrive on our streets. We will take back control. We will shut it down”
Under the Coalition’s plan:
- Tobacco excise will be cut by 80 per cent, slashing the excise on a standard packet of 20 cigarettes from around $30 to around $6, dramatically reducing the price advantage enjoyed by the black market. The rate will be reviewed after two years with a view to ensuring the illegal market cannot rebuild.
- A $200 million nationwide law enforcement surge will back more raids, arrests, seizures, and investigations to shut illegal shops, intercept illegal tobacco at the border and dismantle the criminal networks behind the trade. Border Force, the AFP, the Australian Criminal Intelligence Commission and AUSTRAC will be given stronger marching orders to target the gangs, their supply chains and their money.
- Vapes and nicotine pouches will be legalised, regulated, and taxed for adults, replacing Labor’s failed pharmacy-only vape model and total ban on nicotine pouches with a regulated legal market while maintaining strong protections for children. Vapes will attract a low rate of excise of 50c per mL of e-liquid, while nicotine pouches will attract equivalent excise of 2.5 cents per milligram of nicotine.
- A $60 million, three-year national public awareness and education campaign will expose the organised crime behind illegal tobacco and vapes and warn Australians where the money from illegal products ends up and the dangers of smoking.
Destroy the Gangs’ Profit Margin:
Currently, a legal packet of cigarettes costs around $50, with more than $30 of that coming from tobacco excise, while illegal packets can sell for just $15 to $20.
Our excise reduction plan will be reviewed after two years, with the excise maintained at a level that keeps the black market from rebuilding, whilst maintaining a viable legal and taxed tobacco market.
The immediate objective is to remove the huge price gap that has made Australia one of the most lucrative markets in the world for illegal tobacco.
That will make it much harder for criminals to undercut legal retailers and start bringing billions of dollars in tobacco sales back from the shadows.
The Australian Bureau of Statistics (ABS) found prices for legal tobacco products have almost tripled since 2016, largely because of excise increases, while estimated prices for illegal tobacco have remained relatively stable.
The result has been a massive shift from legal shops into the black market.
In 2017, illicit tobacco accounted for around 10 per cent of consumption. By 2025, ABS estimates put the illicit share at around 80 per cent.
An 80 per cent excise cut will reduce the excise in a standard 20-pack from around $30 to just over $6.
The Parliamentary Budget Office estimates this is sufficient to bring prices in the legal and illicit markets into alignment, making it difficult for the illicit market to compete, ultimately driving consumers back to the legal market.
Alongside the other complementary measures, this is how the Coalition will start bringing the market back from the shadows.
Leader of The Nationals, Senator Matthew Canavan, said Labor’s tobacco tax experiment had become a textbook case of government policy making a problem worse.
“Labor has pushed tobacco taxes so high that it has created a massive profit margin for organised crime,” Senator Canavan said.
“When criminals can sell a packet for a fraction of the legal price, Australians should not be surprised that the black market has exploded.
“Cutting the excise will take billions of dollars out of the hands of criminal gangs, bring the market back under Australian law and give our police a fighting chance to shut down those who remain.
“This is a practical, common-sense policy. We are going to stop taxing legitimate businesses out of existence and start putting organised crime out of business.”
Bring Vapes and Nicotine Pouches Out of the Black Market:
Labor’s approach to vapes has failed just as badly.
Vapes may technically be restricted, but they are readily available illegally in shops across Australia.
The Government has said 95.7 per cent of e-cigarettes sold in Australia are illegal, with the illegal vape market worth around $1.6 billion.
The ABS estimates that since the government effectively banned vapes in 2024, vape consumption has risen by around 140 per cent.
In July, the Government extended an even more restrictive approach to nicotine oral pouches, banning their importation entirely. Experience with cigarettes and vapes suggests their illicit usage will only skyrocket.
The Coalition will replace Labor’s failed pharmacy-only vape model and ban on nicotine pouches with a legal and regulated market for adults, including sales through non-pharmacy retailers.
Nicotine vapes will be taxed at 50 cents per mL of e-liquid and subject to GST, while nicotine oral pouches will also be legalised and taxed at 2.5 cents per milligram of nicotine.
Vapes and nicotine pouches will be brought under Australian regulation, including plain packaging requirements, instead of being supplied overwhelmingly through an illegal market where criminals pay no tax and consumers have little certainty about what they are buying.
Children will remain prohibited from purchasing these products.
The principle is that if adults are already buying these products in huge numbers, they should be buying them from legitimate Australian businesses under Australian rules - not from criminals.
Hit What’s Left With the Full Force of the Law
Cutting the criminal profit margin will be backed by a $200 million nationwide law enforcement surge.
Federal and state authorities will be equipped to shut illegal shops, seize illegal products, arrest organised crime figures, disrupt criminal finances, and stop more shipments at the border.
The Coalition will also seek tough nationally-consistent penalties and stronger coordination between the Australian Federal Police (AFP), Australian Border Force (ABF), the Australian Criminal Intelligence Commission (ACIC), Australian Transaction Reports and Analysis Centre (AUSTRAC) and state police forces.
This is not a choice between tax reform and enforcement. Australia needs both.
Take away the gangs’ massive price advantage, bring customers back into the legal market, and then concentrate police, border and intelligence resources on the criminals who remain.
That is how you bring the tobacco gangs to their knees.
Shadow Minister for Home Affairs, Senator the Hon Jonno Duniam, said these are not backyard cigarette sellers.
“These are serious organised crime networks involved in drugs, firearms, money laundering, and violence,” Senator Duniam said.
“We will attack every part of their operation. Stop the shipments at the border, shut the illegal shops, seize the cash, follow the money, and arrest the people running the networks.”
Fix a System Bleeding the Budget
The current approach has also become a disaster for the Budget.
Governments have kept increasing tobacco excise, yet tobacco excise revenue is collapsing as more sales move underground.
Tobacco excise revenue peaked at around $16 billion in 2019-20. By last financial year, it had halved to around $8 billion. The most recent budget forecast that it will halve again this financial year, and halve again by 2029-30.
The long-run downward trend in legal tobacco consumption (more than offset by rising illicit consumption) suggests the legal market could disappear entirely within the next few years.
Australians are collecting less tax while organised crime is collecting billions in profits.
The Coalition has worked with the independent Parliamentary Budget Office to model a different approach.
The PBO’s modelling of the package, including an 80 per cent excise reduction, estimates the Budget balance would improve by around $8 billion over the first four years (roughly doubling excise revenue) and more than $20 billion over a decade.
The PBO found that smaller excise cuts leave too large a gap between legal and illegal prices to substantially change buying behaviour.
At an 80 per cent reduction, that price gap is dramatically narrowed, shifting sales from the black market back into legal businesses.
More legal sales means less money for criminals and more revenue collected legally by government.
Shadow Treasurer, the Hon Tim Wilson MP, said Labor has managed the extraordinary feat of putting tobacco taxes up while tobacco tax revenue collapses and organised crime makes billions.
“The current system is broken,” Mr Wilson said.
“We have worked with the independent Parliamentary Budget Office, whose forecasting shows our package, including an 80 per cent excise cut, can improve the Budget by around $8 billion over the forwards by shifting sales from the black market back into the legal economy.
“Organised crime doesn’t report to the ATO and a tax doesn’t raise revenue when people stop paying it, right now billions are flowing to organised crime instead of taxpayers to fund healthcare.”
Tobacco Consumption is Already Going Up
This policy is not about encouraging Australians to smoke.
The objective remains to reduce smoking and stop young Australians taking it up.
But the current approach is plainly not delivering the outcome Australians were promised.
Despite tobacco excise continuing to rise, ABS data shows consumption of tobacco increased by around 30 per cent between the end of 2021 and the end of 2025.
The ABS itself says declining legal tobacco consumption has been more than offset by the growth of illicit tobacco and that the greater accessibility and affordability of illegal products is likely to have enabled higher consumption.
Keeping a policy that has delivered higher tobacco consumption, an 80 per cent illicit market, billions in organised crime profits and collapsing tax revenue is not responsible health policy.
Shadow Minister for Health Anne Ruston said Labor’s failed approach had made nicotine easier for children to access while handing control of the market to organised crime.
"There can be no doubt we want to see smoking and vaping rates decrease but under Labor's current policy settings that simply isn't happening,” Senator Ruston said.
“Instead of government regulation controlling tobacco and vaping, control has been handed to criminal gangs who don't care what's in their products or whether children are buying them.
“One shopfront, no age checks, no oversight, two products aimed at getting nicotine into the hands of kids.
“The real cost of getting these settings wrong is a generation of kids with easier access to nicotine than any regulated market would ever allow."
Australians haven’t simply stopped buying tobacco. Too many have moved from legal shops to cheap illegal cigarettes sold by organised crime. At the same time, health outcomes are going backwards.
The Coalition thanks senators for their efforts during the Legal and Constitutional Affairs References Committee which delivered their Illegal Tobacco crisis in Australia report; and, in particular, we thank Ms Mary Aldred MP and Senator the Hon Richard Colbeck, Co-Chairs of the Coalition Taskforce to Tackle Illegal Tobacco, for the forensic policy work contained in their recent report, The Illicit Tobacco Crisis in Australia.
The Coalition will take the market back from organised crime.
We will cut their profits, take away their customers, shut their shops, stop their shipments, follow their money, and arrest the criminals involved in this illicit market of misery.
This is another example of the Coalition’s strong policy plan to fix our economy and protect our way of life.