- Australia’s tobacco tax history spans eight decades of state licence fees, federal excise, and policy-driven increases.
- The April 2010 25% excise increase was the single largest overnight jump.
- From 2013 to 2020, eight annual 12.5% above-indexation increases compounded on top of twice-yearly AWOTE indexation.
- By 2021, the real (inflation-adjusted) price of a leading brand was 8.5 times higher than in 1940 (TIA, Chapter 13.6).
- The July 2025 pack size standardisation mandated all factory-made cigarette packs contain exactly 20 cigarettes.
Quick Answer: Australian tobacco tax has evolved from modest state licence fees in the 1970s to one of the world’s most aggressive excise regimes. The key turning points were the April 2010 25% increase, the eight annual 12.5% increases from 2013 to 2020, and the 2023-2025 5% above-indexation measures. Since 2013, the excise has also been indexed to wages twice yearly, creating an automatic rising tax burden.
What was the early history of tobacco tax in Australia?
The following timeline covers the major tax milestones from the 1970s to 2026.
State licence fees on tobacco were first introduced in 1974, but their effect on prices was limited by the tobacco industry’s strategy of introducing larger pack sizes, according to Tobacco in Australia, Chapter 13.6. Larger packs offered a lower cost per stick, offsetting the impact of the flat licence fee. It was not until the mid-1990s that very large increases in state fees and federal excise made cigarettes significantly more expensive.
When the GST was introduced on 1 July 2000, Australia made a deliberate policy choice: unlike many other countries that reduced their tobacco excise to offset the new consumption tax, Australia kept its excise rate intact. Tobacco in Australia, Chapter 13.6 notes that this was done at the request of health groups, who argued that reducing excise would make cigarettes more affordable and undermine public health goals. The result was a cumulative tax stack: excise plus GST, both applied at full rate.
In 1999, a structural change moved cigarette excise from a weight-based system to a per-stick basis. This was a foundational reform: it meant every cigarette carried the same tax regardless of pack size or brand, laying the groundwork for the systematic increases that followed.
| Period | Tax Structure | Price Impact |
|---|---|---|
| 1974-1990s | State licence fees | Modest; offset by larger pack sizes |
| Mid-1990s | State fees + federal excise (per kg) | Significant price increases begin |
| 1999 | Excise moved to per-stick basis | Structural reform; uniform per-cigarette tax |
| 1 Jul 2000 | GST 10% introduced; excise NOT reduced | Tax stack begins; excise + GST cumulative |
Source: Tobacco in Australia, Chapter 13.6, March 2026.
What changed in April 2010?
The following timeline covers the major tax milestones from the 1970s to 2026.
On 29 April 2010, the Australian Government increased tobacco excise by 25% overnight. This was the single largest one-off increase in Australian tobacco tax history and marked a turning point from gradual increases to aggressive, policy-driven escalation. The increase was part of the Government’s broader health and revenue strategy and was implemented without the gradual phase-in that had characterised earlier tax adjustments. Tobacco in Australia documents this as the event that broke the pattern of modest, incremental tax adjustments that had characterised the previous decades.
The real price of cigarettes had been approximately 3.3 times higher in 2010 (before the increase) than in 1940. After the 2010 increase, the ratio jumped to 4 times the 1940 price. This set the stage for what came next. Around this time, Australian tobacco product manufacturing was also winding down. By 2016, domestic cigarette production had ceased entirely, meaning all tobacco products sold in Australia were imported and subject to excise-equivalent customs duty at the border (TIA, Chapter 13.6).
What happened during the 2013-2020 escalation?
The following timeline covers the major tax milestones from the 1970s to 2026.
From 2013 to 2020, a series of eight annual 12.5% above-indexation increases were applied each September, on top of the twice-yearly AWOTE-based indexation already built into the system (Tobacco in Australia, Chapter 13.6). Each 12.5% increase compounded on the previous year’s already-increased rate.
| Year | 1 March | 1 September |
|---|---|---|
| 2013-2020 | AWOTE indexation only | AWOTE indexation + 12.5% increase |
| 2021-2022 | AWOTE indexation only | AWOTE indexation only (no extra increase) |
| 2023-2025 | AWOTE indexation only | AWOTE indexation + 5% increase |
| 2026 onward | AWOTE indexation only | AWOTE indexation only (no extra announced) |
Source: Tobacco in Australia, Chapter 13.6, March 2026.
The compounding effect was substantial. From September 2015 to September 2025, excise on factory-made cigarettes increased 2.8-fold. The excise on roll-your-own tobacco increased even faster, at 3.6-fold over the same period, driven by both the above-indexation increases and the progressive reduction of the RYO equivalisation weight from 0.8 grams to 0.625 grams per cigarette.
2017: +12.5%×3
2020: +12.5%×8
2025: +5%×3 → 2.8× vs 2015
What did the 2023-24 Budget change?
The following timeline covers the major tax milestones from the 1970s to 2026.
The 2023-24 Federal Budget announced two new tobacco tax measures, summarised in Tobacco in Australia, Chapter 13.6. First, a 5% annual above-indexation increase would apply each September from 2023 to 2025. Second, the RYO equivalisation weight would progressively reduce from 0.7 grams to 0.6 grams per cigarette by September 2026, stepping down 0.025 grams per year: 0.675g in 2023, 0.650g in 2024, 0.625g in 2025, and 0.600g in 2026. These measures were layered on top of the existing twice-yearly AWOTE indexation.
What changed with the July 2025 pack size standardisation?
The following timeline covers the major tax milestones from the 1970s to 2026.
From 1 July 2025, new legislation mandated that all factory-made cigarette packs contain exactly 20 cigarettes and all roll-your-own pouches contain exactly 30 grams of tobacco. This ended the decades-long practice of large packs (40s, 50s) offering a lower cost per stick. As Tobacco in Australia, Chapter 13.3 notes, the pre-standardisation market featured a broad range of pack sizes that made average pricing difficult and allowed price-minimising behaviour through bulk purchasing.
The standardisation closed one of the few remaining legal avenues for reducing per-cigarette costs. Before July 2025, a smoker could reduce their per-stick cost by purchasing a pack of 40 or 50 cigarettes instead of a standard 20-pack. This price-minimising behaviour was well documented in the tobacco control literature and was a direct target of the standardisation policy. Combined with the excise structure, it means every legally sold pack of 20 cigarettes now carries the full per-stick excise burden with no pack-size discount.
Frequently Asked Questions
The following timeline covers the major tax milestones from the 1970s to 2026.
When did Australian cigarette taxes start rising sharply?
The turning point was April 2010, when a 25% overnight excise increase was applied. This was followed by eight annual 12.5% increases from 2013 to 2020, compounded on top of twice-yearly wage indexation. Together, these measures drove the real price of cigarettes to 8.5 times their 1940 level by 2021 (Tobacco in Australia, Chapter 13.6).
How much has cigarette excise increased in the last decade?
From September 2015 to September 2025, the excise on factory-made cigarettes increased 2.8-fold. Roll-your-own tobacco excise increased 3.6-fold over the same period, driven by both rate increases and the tightening of the equivalisation weight formula.
Are there still scheduled excise increases?
The twice-yearly AWOTE indexation on 1 March and 1 September is permanent and automatic. The 5% above-indexation increases ended in September 2025. No further above-indexation increases have been announced as of June 2026. However, the AWOTE-based indexation alone ensures the excise continues to rise with wages.
What was the biggest single tax increase on cigarettes?
The April 2010 25% increase was the largest single overnight jump in Australian tobacco excise history. The eight annual 12.5% increases (2013-2020) had a larger cumulative effect : approximately 160% compounded : but were spread over eight years.
How does the RYO equivalisation weight affect tax?
Roll-your-own tobacco is taxed per kilogram, with the tax converted to a per-cigarette equivalent using an assumed grams-per-cigarette weight. Reducing this weight from 0.8g to 0.6g (by September 2026) means each kilogram of loose tobacco is treated as containing more cigarettes for tax purposes, increasing the effective per-stick tax and narrowing the gap with factory-made cigarettes.
Conclusion
The following timeline covers the major tax milestones from the 1970s to 2026.
Australia’s tobacco tax history is a story of escalating policy ambition. From state licence fees in the 1970s to today’s multi-layered system of per-stick excise, twice-yearly wage indexation, and compounding above-indexation increases, the tax burden on cigarettes has grown relentlessly. The real price of a leading brand was 8.5 times higher in 2021 than in 1940. With automatic AWOTE indexation baked into the law, cigarette prices will continue to rise with wages even without new policy announcements.
For context on how these taxes affect current prices, see our why cigarettes are so expensive guide and tobacco excise explained article.
Related Guides
- Why are cigarettes so expensive in Australia?
- Tobacco excise Australia explained
- Australian cigarette price tracker
Sources
The following timeline covers the major tax milestones from the 1970s to 2026.
- Tobacco in Australia, Chapter 13.6 “What tobacco taxes apply in Australia?”, Bayly M and Scollo MM, Cancer Council Victoria, last updated March 2026. https://www.tobaccoinaustralia.org.au/chapter-13-taxation/13-6-what-tobacco-taxes-apply-in-australia
- Tobacco in Australia, Chapter 13.3 “How much do tobacco products cost in Australia?”, Bayly M and Scollo MM, Cancer Council Victoria, last updated December 2025. https://www.tobaccoinaustralia.org.au/chapter-13-taxation/13-3-how-much-do-tobacco-products-cost-in-australia
Article by davidhe, Product Specialist at SmokerAU. Published June 2026. Last reviewed 28 June 2026.
Disclaimer: This article is for informational purposes only and does not constitute tax or legal advice. Cigarettes are harmful and addictive. For adults 18+ only.