Business Environment Profiles - Australia
Excise on tobacco products
Published: 28 March 2024
Key Metrics
Excise on tobacco products
Total (2024)
1754 Dollars per kilogram
Annualized Growth 2019-24
10.1 %
Definition of Excise on tobacco products
This report analyses the excise tax on tobacco products. This includes excise taxes and customs duties on roll-your-own tobacco. Individual cigarettes containing less than 0.8 grams of tobacco are taxed at a flat rate equal to the roll-your-own tax for a 0.8-gram cigarette. This means that smaller cigarettes are taxed more heavily. The tobacco tax is set at a dollar value rather than a percentage of the sale price. The data for this report is sourced from Tobacco in Australia and is measured in current dollars per kilogram of tobacco.
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Recent Trends – Excise on tobacco products
IBISWorld forecasts the excise on tobacco products to increase by 6.5% in 2023-24, to total $1,753.6 per kilogram. According to the Australian Taxation Office, excise rates for tobacco products increased by 12.5% in December 2013 and each September from 2014 to 2017. With the 2016-17 Budget, the Federal Government arranged for annual increases of 12.5% to the tobacco excise to continue until September 2020. Growth is expected to slow in 2023-24 because of the winding up of the annual 12.5% increases of the previous years.
Until December 2013, the excise tax on tobacco products was indexed to the consumer price index (CPI), preventing the tax from falling in real terms because of inflation. The index was readjusted twice a year, in February and December, to match the increase in the CPI over the previous six months. However, in March 2014, the excise on tobacco was changed from a biannual indexation based on the consumer price index to a biannual indexation based on average weekly ordinary time earnings (AWOTE). This is in addition to the mandated 12.5% increase set out by the Federal Government. This change aimed to prevent the tax from being diminished by increased purchasing power caused by rising real income.
In addition to ensuring that excise taxes do not fall in real terms because of inflation, state and federal governments increase tobacco taxes to achieve other goals. These goals include reducing smoking rates, weakening the burden on the health system and reaching revenue targets. The 2016-17 Budget provided for annual increases in the tobacco excise and equivalent customs duties of 12.5% each year over the four years through 2020-21, contributing to the growth in the excise over the past five years. Starting 1 September 2023, an additional annual hike of 5% on tobacco taxes was applied for three years. Tobacco excise duty rates increase every March and September based on the AWOTE indexation, with the next rate from 1 March 2024 set at a factor of 1.028. Overall, IBISWorld forecasts the excise on tobacco products to grow at a compound annual rate of 10.1% over the five years through 2023-24.
5-Year Outlook – Excise on tobacco products
IBISWorld forecasts the excise on tobacco products to total $1,863.3 per kilogram in 2024-25, rep...
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