Australia is facing a major tobacco-policy fight after a Coalition report recommended cutting cigarette excise by up to 80 per cent â a move that could reduce the price of a legal 25-pack by more than $30.
The proposal comes as tobacco-tax revenue collapses and illicit nicotine products take an increasingly large share of the market. Supporters say the tax cut could narrow the price gap between legal and black-market cigarettes. Health groups warn it could instead make smoking substantially more affordable without eliminating criminal supply.
Could cigarette prices really fall by more than $30?
Yes, under the proposal â but only if it is adopted.
ABC reporting on the Coalition plan says an 80 per cent reduction in tobacco excise could cut more than $30 from the price of a legal pack of 25 cigarettes.
That does not mean Australians should expect an immediate $30 price drop. The proposal has not been enacted, and the final retail saving would depend on the tax rate eventually approved and how much of the reduction tobacco companies and retailers passed on to customers.
What exactly is the Coalition proposing?
The report, authored by Liberal MP Mary Aldred and Senator Richard Colbeck, recommends dramatically reducing tobacco excise as part of a broader attempt to regain control of Australia’s nicotine market.
It also proposes a highly regulated licensed framework for legal vape sales, arguing that the current system has allowed criminal suppliers to gain too much influence over tobacco and nicotine distribution.
One Nation has separately pushed for a 75 per cent excise reduction, meaning the Coalition proposal goes even further.
Why has illegal tobacco become such a big issue?
The scale of the illicit market is now central to the debate.
Experimental estimates from the Australian Bureau of Statistics found that illicit sources accounted for about 80 per cent of total nicotine consumption in 2025, compared with 12 per cent in 2017.
Importantly, that figure covers illicit cigarettes, loose-leaf tobacco, e-cigarettes and other nicotine products. It does not mean exactly 80 per cent of cigarettes sold in Australia are illegal.
The ABS also found that total nicotine consumption rose by almost 40 per cent between 2017 and 2025, while Australia’s population increased by about 14 per cent. Legal tobacco consumption fell to less than one-third of its 2017 level.
Tobacco tax revenue has fallen sharply
The shift away from legal cigarettes has also hit government revenue.
Tobacco excise collections peaked at around $16.3 billion in 2019-20 before falling dramatically in subsequent years. Recent estimates put annual collections at roughly $4 billion, with further declines expected if current trends continue.
That revenue pressure comes as Canberra deals with broader budget challenges, including Australia’s national debt and rising interest costs.
Supporters of a tax cut argue Australia may have reached a point where extremely high prices encourage consumers to leave the legal market rather than quit nicotine altogether.
Why supporters want a dramatic cut
Former Australian Border Force tobacco strike-team founder Rohan Pike has argued that the government needs to move quickly because organised criminals now control a substantial part of the market.
The logic is straightforward: if legal cigarettes become significantly cheaper, the price advantage enjoyed by illicit sellers could shrink, potentially pushing some consumers back to regulated retailers.
Supporters also argue that restoring legal sales could recover part of the tax revenue currently being lost.
Why health experts oppose cheaper cigarettes
The Australian Council on Smoking and Health strongly rejects the idea that Australia can beat criminal suppliers by competing on price.
Chief executive Laura Hunter has argued that illicit cigarettes can be manufactured for extremely little, meaning criminals could still undercut legal cigarettes even after a major tax reduction.
Health advocates instead want tougher border enforcement, stronger retailer licensing, rapid closure of stores selling illegal tobacco and better coordination between federal and state authorities.
Their concern is that substantially cheaper legal cigarettes could weaken decades of tobacco-control policy by making smoking more affordable.
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Organised crime is now part of the policy debate
The issue has moved well beyond tax revenue.
Authorities have linked parts of the illegal tobacco trade to organised crime, intimidation and firebombings involving tobacco retailers. Supporters of lower excise argue the huge legal-illegal price gap creates the profit margins that make the market attractive to criminal groups.
Opponents counter that cutting tax would not dismantle the networks importing, manufacturing and distributing illicit products.
What happens to tobacco tax on September 1?
Australia’s existing tobacco excise system continues to operate while the political debate unfolds, with regular indexation pushing the tax higher.
That creates an unusual situation: legal cigarettes are becoming more expensive under current rules at the same time politicians are considering whether the tax should instead be dramatically reduced.
The tobacco debate also arrives as households adjust to other policy changes, including Australia’s July 1 tax, Centrelink, super and minimum-wage changes.
What smokers should know now
There is currently no approved 80 per cent excise cut and no confirmed $30 reduction in cigarette prices.
The central question is whether lowering the tax would pull smokers back into the legal market and weaken organised crime, or simply make cigarettes cheaper while illicit sellers continue operating.
That unresolved trade-off is why Australia’s tobacco-tax debate has become much bigger than the price of a packet: it now sits at the intersection of public health, organised crime, government revenue and consumer behaviour.
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