Australia’s battle against smoking has taken a dark turn. In a bid to reduce nicotine use, the country has created an environment where illegal tobacco now dominates half the market, fuelling a violent and highly profitable black economy.
Recent data shows that 50 per cent of all cigarettes sold in Australia in June 2025 came from illicit sources. That’s up from 14 per cent just six years ago. At the same time, nicotine use, including vaping, is at record levels, suggesting that heavy taxes and restrictions have failed to reduce addiction.
Instead, organised crime has taken over. Criminal syndicates are raking in an estimated 10 billion dollars a year by selling smuggled cigarettes and unregulated vapes. Compared to drugs, the penalties are mild, and the profits are immense. As a result, criminal gangs are growing bolder and more violent.
Across the country, tobacco-related arson attacks have spiked. In Victoria, more than 125 tobacco shops have been firebombed in recent years, with another 50 reported in other states. Just last week, a shop in Corrimal, New South Wales, was targeted. In some cases, turf wars between syndicates have turned deadly. One young man connected to a known tobacco group was recently shot dead in broad daylight.
Armed robberies are also rising. In Victoria, tobacco-linked robberies have increased by over 150 per cent since February 2024. Gangs of masked teenagers, armed with machetes and guns, are targeting service stations and convenience stores. They ignore tills and focus on cigarettes, which can be worth over 100,000 dollars per store.
Retailers are feeling the pressure. Viva Energy, which operates the largest chain of petrol station convenience stores in the country, reported a 27 per cent drop in legal tobacco sales over the past year. The issue is more than financial. Staff are being traumatised by repeated robberies and threats.
The problem is also hitting the federal budget. In 2019, tobacco excise revenue peaked at 16 billion dollars. This year, it’s expected to fall to 7.4 billion. The rapid growth in the illegal market is the main reason. Between 2016 and 2019, the excise on cigarettes jumped by 55 per cent, pushing more smokers to cheaper black-market alternatives.
Illegal tobacco is not only cheaper. It also comes without the mandatory health warnings and graphic images that are required on legal products. In July 2025, menthol cigarettes were banned entirely, and new laws required each cigarette stick to carry printed health warnings. These regulations raised production costs further and drove more consumers to the black market, where flavoured and menthol products remain available.
The vaping market is similarly out of control. Products with more than 20 milligrams of nicotine require a prescription, yet they are openly sold in many stores. Legal stock is limited, and only a small number of chemists nationwide carry it. There are now an estimated 1.5 million regular vapers, in addition to 2.7 million smokers.
Major retailers are starting to pull out. Coles’s Liquorland has already stopped selling cigarettes, and there are reports that both Coles and Woolworths are considering similar moves in their supermarkets. For petrol stations, quitting tobacco sales is harder, as the category can represent up to 30 per cent of their in-store revenue. But with growing safety concerns and staff burnout, some may be forced to exit the market.
The enforcement problem is clear. While the federal government collects tobacco excise, policing falls to under-resourced state agencies. Border Force inspects just one per cent of shipping containers, and the Tax Office lacks the capacity to take on violent criminal networks. Once inside the country, selling illegal tobacco is not treated as a serious criminal offence.
To its credit, South Australia has taken strong action. The state established a 45-person tobacco enforcement squad with powers to search, seize and shut non-compliant shops without a warrant. These closures can last three months or up to a year with court approval. Queensland has now adopted a similar model, but other states lag behind.
There is growing pressure for a national approach. A coordinated plan between federal and state governments, modelled on South Australia’s laws, could help bring the problem under control.
Reducing tobacco excise to pre-2019 levels is also being floated as a way to bring smokers back into the legal market. Whether or not that happens, one thing is clear: without stronger enforcement and smarter regulation, Australia risks losing the fight against smoking to organised crime.
For the latest retailer news and information, check out the ServoPro website or to speak to us about how we can help your business contact us.