Tobacco Tax Australia 2025: How the New Cigarette Tax Impacts You

Tobacco tax is a hot topic in Australia—especially in 2025, as the federal government introduces another round of hikes designed to curb smoking and boost public funds. With Australia maintaining some of the highest cigarette prices in the world, the financial and social implications of each increase ripple through households, retailers, and the health system. So, what do the new cigarette taxes mean for your budget and the nation’s bottom line?

2025 Tobacco Tax Update: What’s Changing?

From 1 September 2025, the Australian government is implementing another 5% increase to the excise on tobacco products, following the annual indexation to Average Weekly Ordinary Time Earnings (AWOTE). This is the latest step in a multi-year plan announced in the 2023-24 Budget, which saw similar hikes in 2023 and 2024. The goal: reduce smoking rates and boost health outcomes, while shoring up government revenue.

• Current excise (2025): Over $1.35 in tax per cigarette, or more than $27 per 20-pack
• Retail price (2025): Most packs of 25 cigarettes cost upwards of $55, with some premium brands topping $60
• Loose tobacco: Similar tax increases apply to roll-your-own products, with the excise calculated per gram

For context, in 2010, a 25-pack of cigarettes typically cost around $15. The rapid rise is no accident: it’s deliberate policy, and the numbers show a clear trend.

Why Is the Government Raising the Cigarette Tax?

The main driver behind Australia’s high tobacco tax is public health. According to the Australian Institute of Health and Welfare, smoking rates have fallen steadily—from 22% of adults in 2001 to around 10% in 2023—thanks in part to tough regulations and sharp price rises. But it’s not just about health:

• Health cost savings: Fewer smokers mean lower rates of cancer, heart disease, and respiratory illness, relieving pressure on the health system.
• Revenue generation: Tobacco excise and customs duties generated over $15 billion for the federal budget in 2024-25.
• Discouraging youth uptake: Price is a proven deterrent for younger Australians considering smoking.
• Global leadership: Australia is seen as a world leader in tobacco control, with the World Health Organization citing its tax and packaging policies as best practice.

Still, the move is not without controversy. Critics argue that steep tobacco taxes disproportionately affect lower-income Australians and fuel an illicit market for cheaper, untaxed tobacco.

Real-World Impact: How Will the 2025 Changes Affect Australians?

The financial impact is immediate for smokers. Here’s what you can expect in 2025:

• Bigger dent in the wallet: A pack-a-day smoker will now spend over $20,000 a year on cigarettes—a staggering figure that puts significant strain on household budgets.
• Retailer challenges: Convenience stores and tobacconists must adapt to shifting demand, while also managing the risks associated with illicit tobacco trade.
• Health incentives: For those considering quitting, the cost is now a more powerful motivator than ever. The federal government is also investing in smoking cessation programs and support services as part of its broader strategy.
• Tax revenue boost: The 2025 increase is expected to add an extra $3.3 billion to the budget over four years, according to Treasury forecasts.

On the flip side, there’s mounting pressure on policymakers to address the growing black market. The Australian Border Force has stepped up enforcement, but experts warn that rising taxes could continue to drive illegal sales unless broader reforms are introduced.

Looking Ahead: Will Tobacco Taxes Keep Rising?

Australia’s approach is clear: tobacco tax hikes are here to stay, at least for the foreseeable future. With the government committed to a tobacco-free generation and ongoing budget pressures, cigarettes are unlikely to get cheaper anytime soon. Meanwhile, public health advocates are pushing for further investment in cessation support and tougher controls on illicit tobacco imports.

For smokers, the message is equally clear—quitting has never offered bigger financial and health benefits. And for policymakers, the challenge is balancing public health goals, fiscal needs, and the risk of unintended consequences.