Illicit tobacco and illegal vapes.

Illicit tobacco is now one of the busiest areas of enforcement in the country. The trade is treated as an organised crime problem, not a shopkeeper's mistake. On the day of Operation SHORTHAND the National Disruption Group said the operation followed an intelligence referral from the Australian Federal Police and the Australian Criminal Intelligence Commission, alleging links between the targeted service stations, suspected criminal activity, and the sale of illicit tobacco and vapes. The operation was described as ongoing. A raid or a search is not a finding of guilt, and every person and business is presumed innocent unless a court decides otherwise.

This note sets out the offences that apply, not the facts of any one case. It covers the Commonwealth tobacco offences and their penalties, the change to how vapes are sold, the newer New South Wales offences and the licensing scheme, the power to close a shop, and the new offence aimed at landlords. If you run a retail business, or you have been contacted by the ATO, the Australian Border Force, NSW Health or the police, the sections below explain the exposure.

What counts as illicit tobacco in Australia?

Tobacco is illicit when it is grown, manufactured or produced in Australia without an excise licence, or imported into the domestic market without customs duty being paid. It includes cigarettes, cigars, loose tobacco (often called 'chop-chop'), and raw tobacco leaf or plant matter. No one in Australia is currently licensed to grow or manufacture tobacco for sale, so any domestic tobacco crop is unlawful.

The point of the offence is the unpaid duty. Tobacco carries a high rate of excise. When product is sold without that duty being paid, the community loses the revenue and the seller undercuts honest retailers. The ATO puts the tobacco tax gap for 2022 to 2023 at about $2.7 billion. That figure is why the trade draws the attention it does.

Common signs of 'under the counter' tobacco are cigarettes or loose tobacco with no health warnings, a strong tobacco smell in a shop stocked with scented goods, customers asking for cheap or under the counter cigarettes, and small black plastic bags leaving the counter. Those signs are what inspectors look for on a compliance visit.

Is it illegal to sell tobacco or vapes at a service station?

Selling licit, duty-paid tobacco from a licensed premises is lawful. Selling illicit tobacco is not. And since 1 July 2024, selling vapes from a general retail shop is not lawful at all.

Vapes are now regulated as therapeutic goods under the vaping reforms. A service station, a convenience store or a tobacconist cannot lawfully sell a vape. Vapes are supplied through pharmacies. Selling a vape outside that channel can breach the Therapeutic Goods Act 1989 (Cth) and state law, and the goods can be seized. That is why a single shop can face both a tobacco problem and a vape problem at the same time, from two different regulators.

What are the Commonwealth penalties for selling or possessing illicit tobacco?

The Commonwealth regime sits in the Excise Act 1901, backed by the Customs Act 1901, the Taxation Administration Act 1953, and the Criminal Code Act 1995. It was built out by the Treasury Laws Amendment (Illicit Tobacco Offences) Act 2018, which created a set offence for each activity. The penalties are calculated in penalty units. From 1 July 2026 a Commonwealth penalty unit is $364.

The activities and their maximum penalties are these:

• Possessing more than 2 and less than 5 kilograms: a civil penalty, a fine of up to $36,400.
• Possessing 5 kilograms or more: a criminal offence, up to 5 years' imprisonment, or a fine between $72,800 and $364,000, or both.
• Selling illicit tobacco: a criminal offence, up to 5 years' imprisonment, or a fine between $72,800 and $364,000, or both.
• Buying illicit tobacco: a criminal offence, up to 5 years' imprisonment, or a fine between $72,800 and $364,000, or both.
• Manufacturing or producing illicit tobacco: a criminal offence, up to 10 years' imprisonment, or a fine between $182,000 and $546,000, or both.

Two things stand out. The buyer commits an offence, not only the seller. And a conviction for possession of 5 kilograms or more, or for selling, is a criminal record with real jail exposure, not a fine to be written off as a cost of doing business.

Parliament is going further. On 26 March 2026 the government introduced the Combatting Illicit Tobacco Bill 2026. As introduced, it creates new offences for large-scale illicit tobacco activity linked to organised crime, lifts the penalties across importing, possessing, buying, selling, producing and manufacturing, and expands the unexplained wealth and proceeds of crime tools. It would amend the Customs Act 1901, the Excise Act 1901, the Proceeds of Crime Act 2002, the Taxation Administration Act 1953, and the Telecommunications (Interception and Access) Act 1979, the last to allow wiretaps for serious tobacco offences. Anyone facing a tobacco matter should check whether the older or the newer penalties apply to their conduct.

What are the NSW penalties, and do you need a licence to sell tobacco?

New South Wales runs its own set of offences under the Public Health (Tobacco) Act 2008, and it has toughened them. Selling illicit tobacco, and possessing a commercial quantity of illicit tobacco, now each carry a maximum of 7 years' imprisonment, a fine of up to $1.54 million, or both. That is a serious indictable offence, higher than the base Commonwealth maximum for the same conduct.

Since 1 July 2025 a retailer in NSW must hold a tobacco licence. Selling tobacco or non-tobacco smoking products without a licence carries a maximum of $660,000 for an individual and $880,000 for a corporation. The licence is the gate. Trading without it is an offence on its own, before any question of whether the stock was licit.

NSW Health inspectors carry the enforcement load at the retail end. Between 1 January and late October 2025 they ran about 1,260 retailer inspections and seized more than 11.8 million cigarettes, over 2,000 kilograms of other illicit tobacco, and around 170,000 illegal vaping goods. The state and Commonwealth work together, which is why a single shop can hear from health inspectors, the ATO and the ABF at once.

Can authorities shut down a shop that sells illegal tobacco?

Yes. NSW has closure powers aimed at the premises, not just the person. The Health Secretary, or a delegate, can issue a short-term closure order of up to 90 days. A Local Court can issue a long-term closure order of up to one year. The trigger is selling illicit tobacco, selling illegal vaping goods, or trading without a tobacco licence.

A closure order can end a business overnight. For a leased shop, a closure can also put the tenant in breach of the lease. The order sits alongside the criminal charge, so a retailer can face a prosecution and a shut shop at the same time.

Can a landlord be charged for illicit tobacco sold by a tenant?

This is the newest edge of the law. NSW has created an offence aimed at landlords who knowingly allow illicit tobacco or illegal vapes to be sold from their premises. The penalty runs up to $165,000 or one year in jail. The idea is to reach the property owner who lets a shopfront to a tenant that sells illegal stock and looks the other way.

Knowledge is the key element. A landlord who does not know, and could not reasonably have known, is in a different position from a landlord who has been told and does nothing. If you own commercial premises and a tenant has been raided, get advice early. What you knew, and when, will matter.

What happens after a raid like Operation SHORTHAND?

A large operation of this kind is a search and seizure exercise first. Officers execute a warrant, seize stock, records, phones and cash, and take statements where they can. Charges do not always follow on the day. The agencies then assess the material, trace the money, and decide who to charge and with what. In the words of the National Disruption Group, an operation can remain active for weeks after the visible raids.

If your business is caught up in an operation, three points are worth holding onto. You do not have to answer questions in a police interview; get advice before you do. Read our note on the recorded police interview and what a caution means. Second, the seizure of money and property may be the start of proceeds of crime action, not just a tobacco charge; our note on money laundering and proceeds of crime explains how restraint and forfeiture work, and the NSW position on possessing proceeds of crime sits alongside it. Third, if a search warrant is executed at your shop or home, our guide on what to do after a search warrant sets out your rights on the day.

The trade is charged as organised crime because that is how the agencies see it. A retailer who thinks of a carton under the counter as a minor matter can find themselves inside a much larger case, with wealth and property in issue. The safest response to any contact from an enforcement agency is to say nothing and call a lawyer.

Frequently asked.

Is it a crime to buy illicit tobacco?

Buying illicit tobacco is a Commonwealth offence. Under the tobacco offence regime in the Excise Act 1901, buying illicit tobacco products carries a maximum of 5 years' imprisonment, or a fine between $72,800 and $364,000, or both. The buyer commits an offence separate from the seller.

Are vapes illegal to sell in Australia?

Since 1 July 2024 vapes are regulated as therapeutic goods. General retailers, including service stations, tobacconists and convenience stores, cannot lawfully sell vapes. Vapes are supplied through pharmacies. Selling vapes outside that channel can breach the Therapeutic Goods Act 1989 (Cth) and state law, and the goods can be seized.

Who investigates illicit tobacco in Australia?

The Illicit Tobacco Taskforce, led by the Australian Border Force, brings together the ATO, Home Affairs, the Australian Criminal Intelligence Commission, AUSTRAC, the CDPP and law enforcement partners. State health inspectors and state police also enforce state tobacco and vaping laws. Multi-agency operations run under the Illicit Tobacco National Disruption Group.

Can the proceeds of an illicit tobacco business be seized?

Yes. The ATO and partner agencies use proceeds of crime and unexplained wealth powers under the Proceeds of Crime Act 2002 (Cth) to restrain and forfeit money, vehicles and property linked to the illicit tobacco trade. The Combatting Illicit Tobacco Bill 2026 proposes to expand those powers further.

What should you do if the ATO, ABF or police contact you about tobacco?

Do not answer questions or hand over records until you have legal advice. You are not obliged to participate in a police interview. Get advice on your rights before any interview, and before you sign anything or make any statement. Call a criminal defence lawyer first.

To speak to a criminal defence lawyer, call Aaron Kernaghan on 0421 717 019.

This article is written by Aaron Kernaghan, criminal defence lawyer at Good Legal Lawyers, as at 11 August 2026. It is commentary and reflects the personal opinion of the author only. It is not legal advice, it is not a substitute for advice on your own matter, and it does not purport to be accurate or complete. Any matter referred to may be before the court and any person charged is presumed innocent. For advice on a specific matter, contact Aaron Kernaghan on 0421 717 019 or contact the firm.

More criminal-law commentary by Aaron Kernaghan.

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