TOBACCO DUTY HARMONISATION

Today Parliament passed legislation to ensure that manufactured cigarettes and roll your own (loose leaf) tobacco receives comparable taxation treatment. 

Currently, there is a disparity in the duty applied to cigarettes and loose leaf tobacco. The disparity occurs because the duty on cigarettes is a set amount per cigarette stick – an assumed 0.8 grams of tobacco. The duty on loose leaf tobacco is applied by reference to weight, at a rate per kilogram. As the average stick cigarette contains less than 0.8 grams of tobacco, the current rate of duty on loose leaf tobacco is a lower effective rate than for stick cigarettes.

To correct the disparity, the per kilogram tobacco duty rate will be based on the new assumption that the average cigarette contains 0.7 grams of tobacco and not 0.8 grams of tobacco as applies under the current rate.

This measure is estimated to deliver $360 million to the Budget over the forward estimates period, and additional GST revenue of $35 million which will be paid to the States and Territories to fund essential services.

The adjustment will increase the duty imposed on roll your own tobacco over four years. The first adjustment will occur on 1 September 2017, with further increases on 1 September 2018, September 2019, and 1 September 2020.

The Turnbull Government is also boosting efforts to combat trade in illicit tobacco. The 2016-17 announced additional funding of $7.7 million to expand the Tobacco Strike Team. The Government is developing legislation to enhance penalties for illicit tobacco offences.