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  • Illicit tobacco

    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 essential community services such as hospitals, schools and roads.

    The illicit tobacco trade includes but is not limited to:

    • the unlicensed production of tobacco plant or leaf
    • the unlicensed 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 – see Excise equivalent goods (imports).

    On this page:

    Domestically grown tobacco

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

    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:

    • hospitals
    • schools
    • roads.

    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.

    Find out more:

    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 outside of the state they live in
    • suspicious responses to online and print ads where land is being advertised for sale or lease
    • an unexplained source of loose tobacco
    • unexplained 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 '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 Department 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 year of operation the ITTF detected and seized more than 262 tonnes of illicit tobacco, with an estimated excise value of more than $270 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 three years.

    Illicit tobacco enforcement – results to date

    Financial year

    Number of operations

    Number of seizures

    Amount seized and destroyed
    (kilograms)

    Estimated excise duty ($million)

    Number of convictions

    2016–17

    15

    15

    117,000

    90

    Nil

    2017–18

    13

    19

    98,000

    90

    2

    2018–19

    7

    8

    41,000

    42

    4

    2019–20

    19

    22

    131,000

    171

    4

    Total

    54

    64

    387,000

    393

    10

    Penalties

    On 16 August 2018, the government passed the Treasury Laws Amendment (Illicit Tobacco Offences) BillExternal Link 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 1 July 2017, the penalty unit amount is $210.

    Penalties for possessing more than two and less than five kilograms of illicit tobacco include:

    • civil penalty – this is a Penalty Infringement Notice of at least $42,000.

    Penalties for possessing over five kilograms of illicit tobacco include:

    • criminal penalty ؎ this is a criminal conviction with a prison sentence of up to 10 years or at least a $315,000 fine or both.

    Penalties for selling illicit tobacco products include:

    • criminal penalty – this is a criminal conviction with a prison sentence of up to five years or at least a $210,000 fine or both.

    Penalties for buying illicit tobacco products include:

    • criminal penalty – this is a criminal conviction with a prison sentence of up to five years or at least a $210,000 fine or both.

    Penalties for manufacturing or producing illicit tobacco include:

    • criminal penalty – this is a criminal conviction with a prison sentence of up to 10 years or at least a $315,000 fine 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 2017–18, we estimate the net tobacco tax gap to be 5%. This equates to approximately $647 million in lost excise revenue, meaning that $647 million 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:

    Media releases

    See also:

    Last modified: 21 Jul 2020QC 54675