Australia's border agency says it seized more than 2,300 tonnes of illicit tobacco in 2025–26, with estimated duty evaded of more than $4.7 billion on border seizures alone. Yet the Tax Office has admitted its own estimate of the tobacco tax gap is "unreliable", and that the Black Market may be far bigger than its official figure. For taxpayers, the gap between those two pictures is a question about lost Revenue that everyone else ends up covering.

The seizure numbers

The Australian Border Force released its 2025–26 results on 20 July 2026. It reported more than 2,300 tonnes of illicit tobacco seized across what it calls the border continuum.

At the border itself, the ABF said it detected 2,259.4 tonnes. That included more than 2.2 billion cigarette sticks and 586.7 tonnes of loose-leaf tobacco.

The ABF put the estimated duty evaded on those border seizures at more than $4.7 billion, excluding GST.

Other figures in the release show how quickly enforcement activity has grown:

  • more than 13.2 million vapes detected at the border, up 112 per cent
  • 114.2 tonnes seized domestically, with cigarette sticks up 496 per cent to 109.4 million and loose tobacco up 232 per cent
  • more than 1,640 offshore referrals, up 209 per cent

Operation PRINTWALL

A large part of the year's total came from one operation. The ABF said Operation PRINTWALL, which ran from 1 December 2025 to 31 March 2026, produced 998.5 tonnes of detections.

About three-quarters of that was at or within the New South Wales border, according to the ABF's 21 April 2026 release.

Put simply, the 998.5 tonnes from a four-month operation is equal to more than 40 per cent of the year's 2,259.4-tonne border tally, although the two figures may not be counted on exactly the same basis.

The concentration in New South Wales suggests enforcement is targeting key entry points and Supply routes, rather than only individual shops.

The ATO's 'unreliable' tax gap

The tax gap is the ATO's estimate of the difference between the tax that would be collected if everyone fully complied and the tax actually collected.

For tobacco in 2023–24, the ATO estimated a net gap of $3.2 billion, or 19.6 per cent. The gross gap was 39.5 per cent. It estimated the illicit market at about 25 per cent of total consumption, or 1,741 tonnes.

The difference between the two gap measures matters. The gross gap is the shortfall before the ATO's compliance work recovers any revenue, while the net gap is what remains after those efforts. A gross gap of almost 40 per cent means a large share of the tax was never paid in the first place.

But the ATO's own page, updated on 31 October 2025, carries a striking caveat: "we now assess this tobacco tax gap estimate as unreliable". It says early research suggests the illicit market may be significantly larger.

That is unusual candour from a tax agency about one of its headline estimates.

Putting the numbers side by side

Illustrative comparison: These figures cover different years and are measured in different ways, so they are not directly comparable. But a rough side-by-side shows why the ATO may have doubts.

The ATO's estimate of the entire illicit market in 2023–24 was about 1,741 tonnes. The ABF's border detections in 2025–26 were 2,259.4 tonnes. That means one year's border seizures alone were roughly 1.3 times the size of the earlier estimate of the whole illicit market.

Seizures are not the same as consumption, and the market may have grown between those years. Still, if authorities are intercepting more tobacco than was thought to be consumed illegally, the earlier estimate looks low.

A second rough calculation: $4.7 billion in estimated duty evaded across 2,259.4 tonnes works out to about $2.08 million per tonne, or roughly $2,080 a kilogram. That simple average treats all seized products alike, which they are not, but it shows how much revenue is at stake per shipment.

Why it matters for the budget and taxpayers

Tobacco excise has long been a significant source of Commonwealth revenue. When a growing share of the market moves underground, that revenue does not disappear from the budget's needs. It has to be found elsewhere, through other taxes, spending cuts or more borrowing.

Tobacco duty is generally collected when products enter the Australian market, and GST is charged on top. Illicit product avoids both, which is why the ABF's $4.7 billion figure excludes GST and the full tax at stake on seized goods would be higher again.

The illicit trade also hurts legitimate retailers, who pay duty and compete with sellers who do not. Cheap black-market product undercuts their prices and draws away customers.

For the ATO, the problem is partly measurement. A tax gap estimate is meant to guide where compliance effort goes. If the agency itself does not trust the figure, it is harder to judge whether enforcement is working.

The admission also raises a broader point. Tax gap figures are estimates built on models and assumptions, and they can be revised. Headline numbers need that context.

What to watch next

Several developments bear watching over the coming months.

First, whether the ATO publishes a revised tobacco tax gap estimate. Its current page flags that the market may be significantly larger, so any update could be a big revision.

Second, the progress of legislation. Bills aimed at illicit tobacco, including the Combatting Illicit Tobacco Bill 2026, have been before federal Parliament, though their current passage status is not covered here.

Third, the ABF's next results. Detections in 2025–26 were boosted by Operation PRINTWALL, so future totals will show whether that level of activity can be sustained. Vape detections are also worth noting, alongside the 112 per cent rise at the border and the jump in domestic cigarette stick seizures.

Finally, the December Mid-Year Economic and Fiscal Outlook may give a fresh read on excise receipts.

For now, the official message is mixed. Seizures are at record levels, but the size of the problem they are aimed at is, by the ATO's own account, uncertain.