Key Highlights

  • Loose tobacco duty rose about 5.8% on 1 September 2026.
  • Factory-made cigarette duty increased 1.6% over the same period.
  • The equivalisation weight fell to 0.6 grams per cigarette.
  • The next routine tobacco excise indexation is due in March 2027.

Excise on loose tobacco rose almost 6% on 1 September 2026, more than three times the increase on factory-made cigarettes. The difference comes from the last step of a three-year phase-in that changes how roll-your-own tobacco is converted into a cigarette-equivalent tax. With the next indexation due in March 2027 and the Coalition and One Nation pushing for excise cuts, tobacco tax remains a live political issue.

The new rates from 1 September

The ATO publishes two tobacco excise rates. One is a per-stick rate for cigarettes and other sticks containing no more than 0.8 grams of tobacco. The other is a per-kilogram rate for loose tobacco and for sticks containing more than 0.8 grams.

From 3 March to 31 August 2026, the per-stick rate was $1.52829. From 1 September 2026 it is $1.55274. That reflects an indexation factor of 1.016, according to the ATO.

The per-kilogram rate moved much further. It was $2,445.26 a kilogram before 1 September and is now $2,587.90 a kilogram. Calculated from those figures, that is an increase of about 5.8%, compared with 1.6% for sticks.

Both rates are set under existing law. No new legislation was needed for the September changes to take effect.

The 0.8-gram dividing line matters for products other than cigarettes. A stick heavier than that, such as many cigars, is taxed by weight at the per-kilogram rate rather than per stick. Calculated from the new rate, a 2-gram stick would carry about $5.18 in excise, up from about $4.89 before 1 September. That means heavier products were also caught by the larger September increase.

Why loose tobacco rose faster than cigarettes

The key is the "equivalisation weight". This is the amount of loose tobacco the system treats as equal to one cigarette. The per-kilogram rate is effectively the per-stick rate divided by that weight.

the weight has been reduced from 0.7 grams to 0.6 grams. The reduction was phased in from 1 September 2023 and is fully in effect from 1 September 2026.

A lower weight means each kilogram of loose tobacco is treated as more cigarettes, so it attracts more duty. At 0.6 grams, a kilogram is treated as about 1,667 sticks. At 0.7 grams, it was treated as about 1,429.

Calculations from the ATO rates imply the weight was 0.625 grams before this final step. Moving from 0.625 grams to 0.6 grams adds about 4.2% on its own. Combined with the 1.6% indexation, that produces the roughly 5.8% rise in the per-kilogram rate. Dividing the new per-stick rate of $1.55274 by 0.6 grams gives the published $2,587.90 a kilogram.

The policy logic is that roll-your-own smokers typically use less tobacco per cigarette than the old 0.7-gram assumption. A higher per-kilogram rate brings the tax on a hand-rolled cigarette closer to the tax on a factory-made one.