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  • Federal Budget 2016 - Individuals

Increase to tobacco excise

The Government has announced a number of measures aimed at further discouraging smoking and improving the health of Australians. This includes increasing tobacco excise, and excise equivalent customs duties by 12.5% per year for the next four years. The increases will take effect on 1 September each year, with the first increase to occur on 1 September 2017.

The Government has also announced it will limit the duty free tobacco allowance to 25 cigarettes from 1 July 2017. This is a significant reduction from the current allowance of 50 cigarettes.

The Government will also provide $7.7 million over two years to the Department of Immigration and Border Protection’s Tobacco Strike Team in an effort to strengthen its regulatory and enforcement response to illicit tobacco. Changes to the Customs Act 1901 and the Excise Act 1901 will also be made to ensure that enforcement officers have access to and appropriate penalties for illicit tobacco offences.

BDO Comment

The measures will see the price of cigarettes increase substantially over the next four years and mean that Australia’s excise on a cigarette will be equivalent to around 70% of its average price. A packet of cigarettes could cost as much as $40 by 2020. Such a substantial tax on cigarettes should certainly help deter Australians from smoking and achieve the Government’s dual objectives of improving our health and increasing revenue.