iscoverAs the ATO continues its battle against illicit tobacco, the NSW government is introducing tough new laws to parliament to help crack down on illegal sales and possession.
NSW joins crackdown on illicit tobacco to protect SME community
07 August 2025
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8 minute read
The NSW government has introduced new laws to double down on the manufacture and sale of illicit tobacco and illegal vaping goods, helping the Tax Office further its investigation and eradication of the illicit tobacco trade.
The penalties introduced by the NSW government were noted to be “some of the toughest penalties” in the country for the sale and commercial possession of illicit tobacco.
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The laws would also grant substantial powers for inspectors to close premises found to be in breach of the new rules and penalties for selling tobacco without a licence, with a maximum penalty of $660,000 for an individual or $880,000 for a corporation.
Ryan Park, NSW Minister for Health, said this wasn’t just a health issue, but a fairness issue as these illegal operators were undercutting small businesses that were doing the right thing.
“These new laws will give us the power to shut down these illicit tobacco and vape stores and disrupt this criminal business model,” Minister Park said.
“These reforms will send a clear message to anyone selling illegal tobacco or vaping products, which is: get rid of these products or they will be seized, your store will be closed and you will be prosecuted to the full extent of the law.”
The new laws and penalties proposed by the NSW government also included a maximum penalty of over $1.5 million and seven years’ imprisonment for the commercial possession and sale of illicit tobacco.
The NSW government would also commence a targeted consultation on a new offence for landlords who knowingly lease these premises to illicit tobacco and vape suppliers.
The newly proposed penalties and offences would also complement the tobacco licensing scheme, which came into effect from 1 July 2025.
The scheme ensured accurate information was collected on tobacco retailing and wholesaling activities in NSW to support enforcement efforts, deter tobacco retailing businesses from operating outside of the law and provide greater oversight of the tobacco retail industry.
The ATO has been targeting illicit tobacco since 1 July 2018, when its Illicit Tobacco Taskforce (ITTF) was established as part of new reforms.
Since then and up until 30 June 2025, the ITTF conducted a total of 180 seizures and destroyed 498,300 kilograms of illicit tobacco, with an estimated excise duty of $781 million.
In 2024–25 alone, the ATO seized 23,311 kilograms of illicit tobacco with an estimated excise duty of $58 million.
The ATO noted its mission against illicit tobacco was about closing the ‘tobacco tax gap’, which was the “difference between the estimated value of excise or customs duty raised from tobacco according to the law and the value actually raised for a financial year”.
“For 2022–23, we estimated the net tobacco tax gap to be 14.3 per cent. 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,” the Tax Office said.
“Engaging in the illicit tobacco trade is a serious offence. It significantly deprives the Australian community of vital funding which could be used to fund essential community services such as health, education, transport and infrastructure.”
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