A Senate committee has recommended passing major illicit tobacco enforcement reforms in a bill that would impose new obligations on customs brokers, licensed depots, and warehouses.
The Senate Legal and Constitutional Affairs Legislation Committee backed the Customs and Other Legislation Amendment (Illicit Tobacco Enforcement Modernisation and Other Measures) Bill 2026 after receiving 10 submissions from Government agencies, public health organisations and freight-sector representatives.
The bill would create new illicit tobacco offences, strengthen seizure and forfeiture powers and extend accountability across parts of the import supply chain.
Schedule 5 carries the most direct consequences for customs and logistics businesses. It would introduce new licence conditions requiring customs brokers, depot licence holders and warehouse licence holders to refrain from facilitating unlawful tobacco activity and take “all reasonable steps” to prevent prohibited conduct within their operations.
What did the committee recommend?
The committee made one formal recommendation: that the bill be passed. Its report described the evidence about the scale of illicit tobacco in Australia as highly compelling and supported stronger measures aimed at disrupting illegal supply chains.
Evidence cited in the report from the Department of Home Affairs estimated illicit tobacco represented about 50 to 60 per cent of the Australian tobacco market in 2024-25, with an estimated value between $4.1 billion and $6.9 billion.
The illicit e-cigarette market was estimated at $1.6 billion and 95.7 per cent of the total e-cigarette market.
The committee also acknowledged concerns about Schedule 5’s practical impact.
It urged the Department of Home Affairs and Australian Border Force to work with affected stakeholders, provide guidance materials and undertake education to prepare industry for the changes.
What does Schedule 5 change?
Schedule 5 would add new conditions to customs broker, depot and warehouse licences.
Licence holders would be required to avoid conduct that facilitates, assists or enables the importation of prohibited tobacco products.
They would also need to avoid conduct inconsistent with their licence or Commonwealth law and take all reasonable steps to prevent such conduct occurring within their operations.
Additional obligations would apply to warehouses handling duty-refundable tobacco.
Those provisions cover approved receiving facilities, secure storage, authorised sales, and electronic registers that document duty-refundable tobacco.
The legislation also proposes expanding the National Customs Brokers Licensing Advisory Committee into the National Customs Licensing Advisory Committee.
Its advisory role would extend to depot and warehouse licence applications and standards, while the Comptroller-General of Customs would retain authority to grant, refuse, suspend or cancel licences.
Why did industry raise concerns?
Several submissions questioned how the new obligations would work in day-to-day customs and logistics operations.
The International Forwarders & Customs Brokers Association of Australia told the inquiry that licensed brokers generally make declarations using information supplied by importers and other parties.
It also noted that brokers may have little opportunity to physically inspect goods before lodgement.
The association argued that statutory obligations should recognise the practical limits on what a broker can know or control when acting for a client.
Freight & Trade Alliance raised similar concerns about how Schedule 5 should be interpreted.
Its submission called for ABF guidance before the provisions commence, supported by education, consultation and practical examples relevant to the different licence types.
FTA told the committee that customs brokers, depot licence holders and warehouse licence holders perform substantially different functions.
“Guidance will therefore be required to ensure that expectations are understood and applied consistently across industry,” FTA said in its submission.
What does ‘all reasonable steps’ require?
The bill establishes the obligation but does not prescribe one universal checklist covering every licence holder and circumstance.
That uncertainty became a central issue during the inquiry.
FTA sought practical guidance explaining how the obligation should apply across different business models and licence types.
The committee did not recommend amending the wording.
Instead, it called for Home Affairs and the ABF to explain the changes and provide guidance before implementation.
Coalition senators made additional recommendations seeking more detailed sector-specific guidance on due diligence, third-party conduct, suspicious activity reporting and the meaning of “all reasonable steps”. Those recommendations are part of the additional comments, not the committee’s primary recommendation.
When would Schedule 5 commence?
The Schedule 5 obligations would not automatically begin when the bill receives Royal Assent.
They would commence on a date fixed by proclamation.
If that does not occur within 12 months of Royal Assent, Schedule 5 would commence the following day automatically.
Schedules 1 to 4 and Schedule 6 are set to begin the day after Royal Assent.
The delayed commencement mechanism creates a separate implementation period for the licensing changes identified during the inquiry.
What other enforcement powers are proposed?
The bill extends considerably beyond licence conditions.
Schedule 1 would create six new tobacco offences, including offences based on reasonable suspicion where authorities would not need to prove an intention to defraud revenue.
The primary offences carry maximum penalties of five years’ imprisonment, 6,000 penalty units or both. Aggravated offences can attract up to 10 years’ imprisonment, 8,000 penalty units or both.
Schedule 4 strengthens tobacco seizure and forfeiture provisions, including an immediate forfeiture pathway for particular prohibited goods.
Schedule 6 changes proceeds-of-crime provisions covering production orders, pecuniary penalty orders and calculations of total wealth.
How did FTA influence the report?
The committee report specifically recorded FTA’s concerns.
The submission sought greater clarity on Schedule 5, practical guidance before commencement, and education targeted at the different businesses affected by the reforms.
FTA also suggested using existing Government identity frameworks and other technology-enabled measures to reduce identity misuse and strengthen supply-chain integrity.
The committee recorded that proposal but did not adopt it as a formal recommendation.
The report leaves the central legislative position unchanged: the committee recommends that the bill pass.
It also records a clear implementation concern. Customs brokers, depot operators, and warehouse licence holders would assume broader obligations under Schedule 5, while the committee has asked Home Affairs and the ABF to explain how those duties should operate before they take effect.
Extracted in full from: https://www.fullyloaded.com.au/illicit-tobacco-bill-customs-licensing-reforms/
