Tobacco excise

Tobacco excise is budgeted to raise $12.5 billion in 2018-19, and $61 billion over the forward estimates. It is our fourth largest tax.

Tobacco excise represents 2.6% of all Commonwealth revenue in 2018-19, and 0.7% of GDP.

Excise is currently (March 2018) levied at the rate of $0.71046 per cigarette, or $916.72 per kilogram of tobacco. Under policies currently in place the excise on tobacco is increased by movements in Average Weekly Ordinary Time Earnings (AWOTE), a rate normally 1% or so above the consumer price index. Over the next three years the excise will be increased by an additional 12.5% each year. Taking these various adjustments into account the average excise on a cigarette over 2018-19 will be $0.7885. The cumulative effect of these changes is such that the per-cigarette excise will increase from 71 cents to $1.10 by September 2020.

You can choose:

• the base rate of excise per cigarette
• whether to index the base rate by AWOTE, CPI or not at all
• whether to apply the additional 12.5% indexation, or a different amount, or to remove it altogether
• whether to apply the same additional indexation to the last year of the forward estimates (i.e. September 2021) or not.

The model assumes current legislative and regulatory parameters as the start point.

The model does not take account of any second round effects that may flow from significant changes to tobacco excise, such as the impact on GST receipts, or medical and hospital expenses.

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