Illicit tobacco

About the illicit tobacco trade

Engaging in the illicit tobacco trade is a serious offence. It significantly deprives the Australian community of vital funding which could have otherwise been used to fund health, education and other essential community services.

The illicit tobacco trade includes but is not limited to the unlicensed:

production of tobacco plant or leaf
manufacture of tobacco products.

Illicit tobacco may include cigarettes, cigars and loose tobacco (also known as 'chop-chop'), and tobacco leaf and plant matter.

Tobacco is illicit when it is:

grown, manufactured and/or produced in Australia without an appropriate excise licence, even if the tobacco is intended for personal use
imported into the domestic market without customs duty being paid.

Domestically grown tobacco

It's illegal to grow tobacco in Australia without the appropriate excise licence. There have been no licenced tobacco growers since 2006 or manufacturers in Australia since 2015.

However, organised crime syndicates continue to orchestrate these growing operations, sometimes by targeting unsuspecting landowners, attempting to lease land to grow illicit tobacco. These operations are not run by genuine farmers or landowners, but by criminals living and operating in local communities.

Organised criminals who deal in illicit tobacco rob the Australian community of valuable revenue, instead:

using their profits to fund their lavish lifestyles
allowing them to continue to engage in criminal behaviour well beyond the sale of illegal tobacco.

This revenue could have been used to fund vital community services such as:

health
education
infrastructure.

In conjunction with our cross-agency partners, such as state and territory police, we manage the risk associated with domestically grown and manufactured illicit tobacco products. Every crop we seize and destroy burns another hole in the illicit tobacco trade.

Signs that someone is growing tobacco

Some of the signs that land is being used to grow, manufacture or produce illicit tobacco are:

intense labour production between November and May
people approaching real estate agents, landowners or farmers to lease land within or outside of the state they live in
suspicious responses to online and print ads where land is being advertised for sale or lease
earthworks along creeks and rivers on private and public land
an unexplained source of loose tobacco
unexplained and potentially unlawful use of water resources
an unexplained strong tobacco odour
large, leafy plants that, depending on the size, may resemble kale, cabbage or corn and may have a pink flower growing on top
other suspicious activity.

Illegal tobacco growing operations have been shut down in the following states and territories:

New South Wales
Northern Territory
Queensland
Victoria.

'Under the counter' tobacco

Organised crime syndicates also target tobacco retailers across Australia to buy and sell illegally grown tobacco, also known as 'under the counter' or 'black market' tobacco.

Buying and selling illicit tobacco is a serious tax crime. Retailers choosing to become involved in the illicit tobacco trade not only contribute to the loss of funding for essential community services, but they also gain an unfair advantage over honest businesses who are doing the right thing. There are penalties involved for selling illicit tobacco.

Removing illegal tobacco from our streets creates a level playing field for all retailers.

Signs that someone is selling illicit tobacco

Some of the signs that tobacco retailers are selling 'under the counter' tobacco are:

cigarettes, cigars or loose leaf tobacco (sometimes referred to as 'chop-chop' or 'roll your own') are missing health warning labels
strong tobacco odour despite the shop containing strongly scented items like candles and incense
customers asking for 'cheap cigarettes' or 'under the counter cigarettes'
customers leaving a retailer with small plastic bags, often black in colour.

Illicit Tobacco Taskforce

On 1 July 2018, the Illicit Tobacco Taskforce (ITTF) was established as part of new reforms. The ITTF enhances the ability of the ATO and our partner agencies to protect Commonwealth revenue, by proactively detecting, disrupting and dismantling serious organised crime syndicates that deal in illicit tobacco.

The taskforce draws on the expertise and advanced capabilities of 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 law enforcement partners.

Under the consolidated power of these government agencies, the taskforce will continue fighting back against organised international and local criminals that operate multimillion dollar crime syndicates.

In its first 3 years of operation the ITTF has detected and seized more than 264 tonnes of illicit tobacco and more than 540 million cigarettes, with an estimated excise value of over $870 million. These seizures demonstrate how effectively these partner agencies work together to stamp out illicit tobacco.

Tackling illicit tobacco

We use a range of investigative and legislative approaches to disrupt illicit tobacco activity. These include:

gathering intelligence
conducting investigations
working with federal and state government and law enforcement agencies as part of investigations and intelligence sharing
identifying, seizing and destroying identified crops
collecting evidence as part of prosecution activity
using the Taxation Administration Act 1953, Excise Act 1901 and the Criminal Code Act 1995 to prosecute offenders.

We have achieved significant outcomes relating to the disruption and deterrence of illicit tobacco, including custodial sentences of up to 3 years.

Illicit tobacco enforcement – results as at 31 October 2024
Financial year	Number of seizures	Amount seized and destroyed (kilograms)	Cigarettes (sticks)	Estimated excise duty ($million)	Number of convictions
2018–19	8	41,400	Nil	42	4
2019–20	22	130,656	11,480	171	4
2020–21	23	109,186	5,496,379	178	1
2021–22	21	110,349	1,661,520	176	1
2022–23	16	66,711	1,207,516	111	6
2023–24	81	16,687	13,382,445	45	11
2024–25	5	4,131	37,480	8	0
Total	176	479,120	21,796,820	731	27

Penalties

On 16 August 2018, the government passed the Treasury Laws Amendment (Illicit Tobacco Offences) BillOpens in a new window which creates a new tobacco offence regime. The tax laws increased the set penalties to a level that provides greater deterrence to illegal activity. The penalty amount is calculated in multiples of a penalty unit. If the infringement occurred on or after 7 November 2024, the penalty unit amount is $330.

Penalties by activity for illicit tobacco
Activity	Penalty
Possessing more than 2 and less than 5 kilograms	Civil penalty – a fine of up to $33,300
Possessing 5 kilograms or more	Criminal penalty – a criminal conviction with a prison sentence of up to 5 years or a fine between $66,000 and $330,000, or both
Selling illicit tobacco products	Criminal penalty – a criminal conviction with a prison sentence of up to 5 years or a fine between $66,000 and $330,000, or both
Buying illicit tobacco products	Criminal penalty – a criminal conviction with a prison sentence of up to 5 years or a fine between $66,000 and $330,000, or both
Manufacturing or producing illicit tobacco	Criminal penalty – a criminal conviction with a prison sentence of up to 10 years or a fine between $165,000 and $495,000, or both

Tobacco tax gap

The tobacco tax gap is the difference between the estimated value of excise or customs duty raised from tobacco according to the law ('tobacco duty') and the value actually raised for a financial year. The tobacco tax gap estimate includes illicit tobacco importation and 'chop-chop'.

For 2022–23, we estimate the net tobacco tax gap to be 14.3%. This equates to approximately $2.7 billion in lost excise revenue, meaning that $2.7 billion was channelled into organised criminal activities, instead of funding essential community services.

How to report it

If you suspect that illicit tobacco is being grown, manufactured or sold in your community you can report it anonymously to us by:

making a tip-off
phoning 1800 060 062.

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