13A.5 Estimates of illicit cigarette trade in Australia

13A.5.1  Australian reports on seizures by government agencies

Reports on seizures of tobacco products by the Australian Border Force (ABF) since 2006–07 in annual reports^1-7 are set out in Table 13A.5.1 and Figure 13A.5.1 below. In Table 13A.5.1, to estimate the size of the illicit tobacco market, volumes of loose tobacco (originally measured in tonnes) have been converted into equivalent numbers of cigarette sticks by assuming that an average of 0.8 grams of loose tobacco was equivalent to one stick.

The Australian Taxation Office publishes outcomes of the illicit tobacco enforcement activities undertaken by the multi-agency Illicit Tobacco Taskforce (ITTF), established in July 2018—see Section 13A.8.3. The number of tobacco seizures, quantity of tobacco, and estimated excise duty value of the seized tobacco, and associated convictions, is reported in Table 13A.5.2.

13A.5.2  Tobacco tax gap

The Australian Taxation Office released an independent assessment of the extent of use of illicit tobacco in Australia in October 2022.⁸ The ATO used a 5-step model-based bottom-up method to estimate the tobacco tax gap.⁹

Step 1: Estimate illicit tobacco arriving through importation

Step 2: Estimate the size of domestic chop-chop cultivation

Step 3: Analyse the licensed warehouse system

Step 4: Compare total illicit amounts to legal clearances

Step 5: Deduct seizures to determine net gap

The findings of the ATO’s latest independent assessment of the extent of use of illicit tobacco in Australia is presented in Table 13A.5.3. There was $6.411 billion in potential lost excise revenue in 2023–24, including seized illicit tobacco. The lost excise revenue from illicit tobacco that did enter the Australian market was estimated to total $2.711 billion in 2022–23 and $3.185 billion in 2023–24. This compares to the $6.7 billion claimed by the industry-funded FTI Consulting report for 2024¹⁰– see Section 13A.3.2.

13A.5.2.1  Limitations of theoretical tax

The ATO has acknowledged that people who smoke illicit tobacco may smoke less if they were paying the higher price charged for legally sold tobacco that includes excise duty. This would affect the amount of duty recoverable if the illegal market were eliminated, likely reducing the size of the total market.

The gross gap refers to illegal tobacco entering the market, including tobacco seized by authorities. If all efforts to prevent illegal tobacco stopped, the same volume of illicit tobacco would likely exceed current consumer demand. Prices and profit margins would then fall, making the supply of illicit tobacco less appealing. If the same quantity of tobacco entered the market legally, volume would drop. This is because excise duty reduces profitability. Legal importations fell over each of the six years up to 2023–24.

13A.5.3 Estimates of illicit tobacco use or purchase from national surveys

13A.5.3.1 Roy Morgan Single Source Survey

Since 2020, the Roy Morgan Single Source survey has asked respondents about use of illicit tobacco, including cigarettes and loose tobacco. Figure 13A.5.2 plots the self-reported annual prevalence of illicit tobacco use in the adult Australian population (that, is among all adults, not just adults who smoke). Reported use of illicit tobacco was below 2% until 2023, increasing by 1.4 percentage points to 3.7% in 2024.¹¹ Reported use of illicit tobacco was higher in the period of July 2024 to June 2025 at 4.8% compared to January to December 2024 (3.7%).

13A.5.3.2  National Drug Strategy Household Survey

The National Drug Strategy Household Survey (NDSHS) is a national representative survey of Australians, and collects information about awareness and use of illicitly traded tobacco, focusing on two types of products: unbranded tobacco and cigarette packs that are not plainly packaged. In the NDSHS, current use of unbranded tobacco was defined as those who stated that they smoked ‘unbranded tobacco (also called ‘chop-chop’) usually sold loose in plastic bags either as tobacco or rolled into cigarettes’ every day, some days, or only occasionally. Current use of non-plainly packaged tobacco purchased in Australia was defined as those who had purchased at least one tobacco product in Australia in the past 3 months which did ‘not have the plain packaging/graphic health warning’. Findings from the 2022–23 NDSHS¹² and previous years are presented below. Table 13A.5.4 shows that the proportion of people who currently smoke aged 14 years or older who were aware of unbranded (chop-chop) tobacco significantly increased from 34.1% in 2019 to 43.3% in 2022–23. Current use of unbranded tobacco among current smokers was 1.8 times higher in 2022–23 compared to 2019. Among those current smokers who were aware of unbranded tobacco, current use increased by 44% from 14.4% in 2019 to 20.7% in 2022–23.

Use and awareness of manufactured illicit tobacco, that is, packs that do not comply with Australia’s plain packaging and graphic health warning requirements, has also increased since 2019. Figure 13A.5.3 shows that in 2022–23, one in five current smokers had seen packs without plain packaging in the past 3 months, up from 15.2% in 2019. The proportion who had purchased such a pack in the past 3 months also increased from 6.2% to 10.2%. As a proportion of the total Australian population aged 14+ years, 1.4% had recently purchased a tobacco product without plain packaging.

Of current smokers who had recently purchased a product without plain packaging, approximately 39% had purchased 15 or more packs in the past 3 months (a minimum of one pack every 6 days), 31% had purchased 1 or 2 packs, and 17% had purchased 3 to 5 packs.¹³

Figure 13A.5.4 shows the usual place of purchase of packs that did not have plain packaging or graphic warnings, for current smokers who had made a purchase in the past three months. The proportion who usually purchased illicit tobacco from a tobacconist was 1.6 times higher in 2022–23 than 2019, increasing from 25.2% to 40.1%. An increase in the proportion purchasing from informal sellers also increased, while the proportion who usually purchased from a supermarket, convenience or grocery store decreased by one-third.

An analysis of use of illicitly traded tobacco from the 2013 to 2022–23 NDSHS examined the proportion of Australians aged 18+ years who currently smoked who used any quantities of unbranded tobacco but no non-plain packs, any quantities of non-plain packs but no unbranded tobacco, or any quantities of both forms of illicit. (Note that these categories do not refer to exclusive use of illicitly traded tobacco with no use of legally traded tobacco; participants may have used some form of legally traded tobacco in addition to illicitly traded tobacco.) This study found that use of unbranded tobacco increased from 2.8% in 2013 to 6.5% in 2022–23, almost doubling from 3.8% in 2019.¹⁴ Use of non-plain packs was 9.0% in 2013 (very soon after the implementation of plain packaging in December 2012), then declined to 4.8% in 2016, and increasing to 7.4% at 2022–23. Use of both unbranded tobacco and non-plain packs was least common in all years, at 0.8% in 2013, 1.2% in 2019, and doubling to 2.4% in 2022–23. In total, 16.5% of Australian adults who smoked used illicitly traded tobacco in 2022–23, up from 10.1% in 2019. Further analysis of the correlates of illicitly traded tobacco use showed that use of unbranded tobacco was higher among males, people not currently employed, those experiencing high or very high psychological distress, people who had used cannabis in the past year, people who used both cigarettes and roll-your-own tobacco, and heavier daily cigarette consumers. Use of non-plain packs was higher among people who used illicit substances other than cannabis in the past year. Use of both unbranded tobacco and non-plain packs was higher among the lowest socioeconomic group, people who used illicit substances other than cannabis in the past year, and heavier daily cigarette consumers.¹⁴

Figure 13A.5.5 shows the proportion of Australian, overall and in each state and territory, aged 14+ years who currently smoked who used unbranded tobacco and/or non-plainly packaged products in 2016, 2019 and 2022–23. In 2022–23, 16.6% of Australians who smoked used unbranded tobacco and/or non-plain packs, an increase from 10.0% in 2019. Large increases between 2019 and 2022–23 were seen in New South Wales, Victoria, Queensland, and Western Australia. Use of these forms of illicit tobacco was highest in all years in the state of Victoria.

Figure 13A.5.6 shows estimates of current use of only unbranded tobacco, only non-plainly packaged products, or use of both forms of illicit tobacco, by area, among people aged 14+ years who smoke tobacco. Note that these categories do not refer to exclusive use of illicitly traded tobacco with no use of legally traded tobacco. Estimates for all states and territories other New South Wales (NSW) and Victoria showed high levels of variance and so are reported as a combined ‘Rest of Australia’ category. There was a different pattern in the types of illicit tobacco used in NSW and Victoria to the rest of Australia combined. In both NSW and Victoria, use of non-plain packs approximately doubled between 2019 and 2022–23, but use of only unbranded tobacco showed little change. Use of unbranded tobacco was more prevalent in Victoria than NSW in all years. In contrast, the rest of Australia combined showed little increase in use of non-plain packs but a more than two-fold increase in the use of unbranded tobacco. Across all areas examined, combined use was similar in 2022–23, but had increased from 2019.

13A.5.4 Measuring changes in illicit tobacco use following plain packaging

A series of studies conducted to evaluate the effects of plain packaging in Australia used several ways to define and monitor use of likely illicit tobacco through small retail outlet monitoring and a national survey.^15,16

The small retail outlet monitoring study examined changes in the availability of illicit tobacco in small mixed-business retail outlets in Victoria following the introduction of plain packaging in 2012 in Australia.¹⁶ Fieldworkers 1) requested a particular low-cost brand of cigarettes and then pressed the retailer for an ‘even cheaper’ brand, and 2) asked about the availability of unbranded (chop-chop) tobacco. The cheapest pack of cigarettes was bought and evaluated for compliance with Australian packaging regulations. Tax liabilities and recommended retail prices were compared to the price paid for the brand and pack size.

The percentage of packs purchased that were either non-compliant with Australian health warnings and/or suspiciously priced in pre-plain packaging was 2.2% (13/598 packs purchased). The percentages of packs that satisfied either or both requirements was 1.3% (4/297 packs purchased) in the implementation month and 0.6% (5/878 packs) in the three collection months after introduction. The availability of chop-chop was extremely rare both in implementation month (December 2012) and postimplementation (0.6%; n=2 and 0.6%; n=3, respectively). A follow-up study in tobacconists found very few offers to sell chop-chop tobacco (3.1%) in 2013.¹⁷

Using a national representative survey,¹⁵ illicit tobacco use was measured in four ways in 2012–2014, to assess changes in illicit tobacco use following the implementation of Australia’s plain packaging legislation. Participants were asked to give the brand name, pack size, price paid, and place of purchase, of the last cigarette they smoked. 

1. ‘Cheap whites: Nominated cigarette brands were examined against a list of ‘cheap white’ products produced specifically for the illicit market using the World Customs Organization Illicit Trade Report 2012 and reports by the international consulting company KPMG LLP. Cheap white cigarettes are made in one country and smuggled into other countries and sold on the illicit market.¹⁸ Names of Cheap white products included Dunstan, Jin Ling, Manchester, Modern, Regal, Sunlite, Timeless Time, Win, YunYan, Zhongnanhai, Nanjing, Su Yan, and Zig Zag
2. International brands purchased at suspiciously low prices: Nominated cigarette brands were compared to list of frequently smuggled brands from the World Customs Organization.¹⁸ These brands included Benson & Hedges, Brooks, Camel, Craven A, Dunhill, Furongwang, Golden Eagle, LM, Lucky Strike, Marlboro, Mild Seven, Phillip Morris, Rothmans, Shuangxi, and 555.

Suspiciously low prices were defined as the reported price paid being 20% or more below the recommended retail price (RRP) for the pack for these brands.

3. Purchase from informal sellers: that relatives or friends had purchased their cigarettes and reported purchase sources including ‘from someone selling independently and/or illegally (not at a store, shop, or other mainstream establishment, but perhaps at local markets, delivery service, door-to-door, in a pub, or just in the street)’.
4. Unbranded illicit ‘chop-chop’ tobacco: Indirect and direct questions were used to define the use of unbranded illicit tobacco as indicating any of the following throughout the survey:
   • Cigarette users were asked whether they currently smoked any other form of tobacco and, if so, which types: Some respondents mentioned unbranded tobacco.
   • Cigarette users could also report ‘unbranded tobacco’ as their ‘current brand’, usual brand (the brand they smoked more than any other), or ‘another brand’ they frequently smoked.
   • Those who said they did not know the brand name or refused to give it were directly asked whether it was unbranded tobacco.
   • Reporting an unbranded tobacco or cigarette purchase in the past month through a direct question (“bought loose unbranded tobacco in a plastic bag that is known as chop-chop” or “bought unbranded or chop-chop tobacco that has already been rolled into cigarettes”).

Compared to pre-plain packaging, there were no significant increases in the plain packaging phase in use of "cheap whites" (<0.1%; OR=0.24, 95% CI 0.04 to 1.56, p=0.134); international brands purchased for 20% or more below the recommended retail price (0.2%; OR=3.49, 95% CI 0.66 to 18.35, p=0.140); or packs purchased from informal sellers (<0.1%). Unbranded illegal tobacco use was maintained at 3% (adjusted OR=0.79, 95% CI 0.58 to 1.08, p=0.141).¹⁵

13A.5.5 Estimates using publicly available data

More recently, a ‘top-down’ approach was used estimate the size of the illicit cigarette market in Australia using publicly available data.¹⁹

The study estimated the size of the illicit cigarette market by deducting formal net clearances from total consumption and expressed both as number of sticks and a percentage of the total market. The study authors used Euromonitor’s estimates of actual consumption (cigarette sticks) per year and clearance data posted online by the Department of Home Affairs (DOHA) in response to a request under Freedom of Information (FOI) provisions. They assumed the balance from this calculation was illicit tobacco consumption.

Illicit sticks = Actual consumption (sticks) – formal 'net' clearances FOI

They found that the illicit tobacco market share was 5.7% in 2015, 4.4% in 2016ⁱ , 8.3% in 2017 and 6.6% in 2018. These estimates were closer to the ATO’s estimates and substantially lower than KPMG’s for Australia during the same period. The measurement of overall cigarette consumption, including the quantification of illegal cigarette penetration, conducted by Euromonitor, is subject to an over-dependence on its methodology. The available data of overall tobacco consumption is restricted solely to cigarettes, and does not account for roll-your-own tobacco use.

i The authors noted ‘this is the first year in which a restructure of the tobacco industry resulted in the cessation of cigarette production in Australia and the tobacco companies moving to fully supplying the market with imported finished sticks. In addition, the FOI data for 2016/17 also shows a combination of a fall in imports of some 500 million sticks with a further adjustment of 27 million sticks being taken out of domestic clearances. Therefore, this may mean the 2016 illicit estimate of 4.4 per cent should be higher and the 2017 estimate of 8.3 per cent lower.’

References

1. Australian Government Department of Home Affairs. Annual report 2017-18. Canberra: Australian Government 2018. Available from: https://www.homeaffairs.gov.au/reports-and-publications/reports/annual-reports.

2. Australian Government Department of Home Affairs. Annual report 2018-19. Canberra: Australian Government 2019. Available from: https://www.homeaffairs.gov.au/reports-and-publications/reports/annual-reports.

3. Australian Government Department of Home Affairs. Annual report 2019-20. Canberra: Australian Government 2020. Available from: https://www.homeaffairs.gov.au/reports-and-publications/reports/annual-reports.

4. Australian Government Department of Home Affairs. Annual report 2020-21. Canberra: Australian Government 2021. Available from: https://www.homeaffairs.gov.au/reports-and-publications/reports/annual-reports.

5. Australian Government Department of Home Affairs. Annual report 2021-22. Canberra: Australian Government 2022. Available from: https://www.homeaffairs.gov.au/reports-and-publications/reports/annual-reports.

6. Australian Government Department of Home Affairs. Annual report 2022-23. Canberra: Australian Government 2023. Available from: https://www.homeaffairs.gov.au/reports-and-pubs/Annualreports/home-affairs-annual-report-2022-23.pdf.

7. Australian Government Department of Home Affairs. 2023-24 Annual report. Canberra: Australian Government 2024. Available from: https://www.homeaffairs.gov.au/reports-and-pubs/Annualreports/home-affairs-annual-report-2023-24.pdf.

8. Australian Taxation Office. Tobacco tax gap: Trends and latest findings.  2022. Last update: Viewed Available from: https://www.ato.gov.au/About-ATO/Research-and-statistics/In-detail/Tax-gap/Tobacco-tax-gap/?anchor=Trendsandlatestfindings1#Trendsandlatestfindings1.

9. Australian Taxation Office. Tobacco tax gap: Methodology. Canberra 2022. Last update: Oct 2022; Viewed 21 Oct. Available from: https://www.ato.gov.au/About-ATO/Research-and-statistics/In-detail/Tax-gap/Tobacco-tax-gap/?page=4.

10. FTI Consulting. Illicit tobacco in Australia, 2022 Full Year report United States: Philip Morris International, 2023. Available from: https://www.pmi.com/resources/docs/default-source/australia-market/illicit-tobacco-in-australia---2022-full-year-report.pdf?sfvrsn=93c497b6_2.

11. Roy Morgan Research. The full picture: a decade of smoking in Australia. Article No. 9937.Melbourne, Australia 2025. Available from: https://www.roymorgan.com/findings/9937-cigarette-smoking-in-australia-press-release.

12. Australian Institute of Health and Welfare. National Drug Strategy Household Survey 2022–2023. Canberra: AIHW, 2024. Available from: https://www.aihw.gov.au/reports/illicit-use-of-drugs/national-drug-strategy-household-survey.

13. Australian Institute of Health and Welfare. Data tables: National Drug Strategy Household Survey 2022–2023 – 2. Tobacco smoking. Canberra: AIHW, 2024. Available from: https://www.aihw.gov.au/reports/illicit-use-of-drugs/national-drug-strategy-household-survey/data.

14. Cho A, Scollo M, Lim C, Puljević C, and Gartner C. Trends and correlates of current use of illicitly traded tobacco in Australia: Evidence from a decade of national surveys. Addiction; n/a(n/a). Available from: https://onlinelibrary.wiley.com/doi/abs/10.1111/add.70236

15. Scollo M, Zacher M, Coomber K, and Wakefield M. Use of illicit tobacco following introduction of standardised packaging of tobacco products in Australia: results from a national cross-sectional survey. Tobacco Control, 2015; 24:ii76-ii81. Available from: http://tobaccocontrol.bmj.com/content/24/Suppl_2/ii76.full

16. Scollo M, Bayly M, and Wakefield M. Availability of illicit tobacco in small retail outlets before and after the implementation of Australian plain packaging legislation. Tobacco Control, 2015; 24:e45-51. Available from: http://www.ncbi.nlm.nih.gov/pubmed/24721966

17. Scollo M, Bayly M, and Wakefield M. Availability of chop-chop tobacco in Victorian tobacconists following introduction of plain packaging. [Letter]. Australian and New Zealand Journal of Public Health, 2014; 38(3):293-4. Available from: https://www.ncbi.nlm.nih.gov/pubmed/24890492

18. World Customs Organization. Illicit Trade Report 2012. Brussels, Belgium 2013. Available from: https://www.wcoomd.org/-/media/wco/public/global/pdf/topics/enforcement-and-compliance/activities-and-programmes/illicit-trade-report/itr_2012_en.pdf?db=web.

19. Preece R and Neher A. The extent of the illicit cigarette market in Australia: using publicly available data in a ‘top‑down’approach to estimation. World Customs Journal, 2020; 14(1):3-16. Available from: https://worldcustomsjournal.org/Archives/Volume%2014%2C%20Number%201%20(Apr%202020)/1897%2001%20WCJ%20v14n1%20Preece%20and%20Neher.pdf?_t=1586404485#:~:text=Illicit%20%25%20estimate&text=6.6%25-,Source%3A%20Authors.,for%20the%20period%20under%20analysis.