Excise on tobacco products

IBISWorld forecasts the excise on tobacco products to increase by 6.4% in 2025-26, to total $2111.16 per kilogram. According to the Australian Taxation Office, excise rates for tobacco products have been indexed twice annually, in March and September, based on changes in Average Weekly Ordinary Time Earnings (AWOTE) since 2014. In addition to this regular indexation, the Federal Government implemented an extra annual increase of 5% to tobacco excise rates starting from 1 September 2023, with these increases scheduled to continue for three years. Growth is expected to slow in 2025-26, as these above-indexation increases conclude.

These policy initiatives are intended not just to maintain the true value of tobacco excise in the face of inflation and growing wages, but also to further discourage tobacco smoking throughout Australia. By raising the price of tobacco products, the government hopes to reduce smoking rates, enhance public health outcomes, and minimise the long-term burden on the healthcare system. The increased revenue generated by these increases supports larger budgetary goals, such as funding for health initiatives and other government programmes.

Regular AWOTE indexation, along with temporary 5% yearly rises, has propelled recent growth in tobacco tax income. As of March 1, 2025, Tobacco Australia reported excise-equivalent customs tax rates of $1.40 per stick for cigarettes containing no more than 0.8 grammes of tobacco and $2,158.65 per kilogramme for loose tobacco. Overall, IBISWorld expects the tobacco excise will increase at a compound annual rate of 6.0% over the five years through 2025-26.