Victoria’s escalating crackdown on illicit tobacco is set to intensify, with the Victorian Government preparing new powers that would allow authorities to shut down businesses caught selling illegal cigarettes, as millions of dollars’ worth of products continue to be seized across the state.
The new regulator, Tobacco Licensing Victoria, reported that nearly $5 million worth of illicit tobacco was confiscated in its first month of operation under Victoria’s newly introduced licensing regime.
Authorities seized more than 3.19 million cigarettes, 2,243 cigars, 40 kilograms of loose-leaf tobacco and 32 kilograms of shisha tobacco, highlighting the scale of the underground trade now operating throughout the state.
Yet despite the seizures, illegal tobacco remains widely available, with the lucrative black market increasingly linked to organised crime and a string of firebombings and violent attacks across Melbourne as rival groups compete for control of the trade.
Under legislation expected to be introduced later in 2026, inspectors would gain sweeping new powers to order the closure of businesses found selling illicit tobacco.
Landlords would also be allowed to terminate leases for tenants involved in the illegal trade, with property owners facing penalties if they knowingly permit such activity.
Regulators would also be empowered to destroy seized tobacco products before court proceedings conclude — a move the government says will prevent stock from re-entering the market and accelerate prosecutions.
Current penalties are already among the toughest in the country. Individuals caught selling illicit tobacco can face fines of up to $370,000 or prison terms of up to 15 years, while businesses risk penalties exceeding $1.8 million.
However, the ongoing “tobacco wars” playing out across parts of Melbourne have prompted debate about whether enforcement alone can solve the problem.
Some economists, retailers and consumers argue the rapid expansion of the black market has been fuelled by Australia’s world-leading tobacco taxes.
A legal packet of 20 cigarettes now commonly costs more than $30, and in some cases approaches $50 — prices many smokers say have become unaffordable.
Supporters of the underground outlets claim the stores have gained popularity not only because of accessibility, but because they offer cigarettes at a fraction of the legal price.
For some consumers, particularly during a period of rising living costs, the cheaper alternatives have become difficult to ignore.
Critics of the government’s tax strategy argue that steep excise increases have unintentionally created a thriving black market, where organised crime groups can undercut legal retailers while still generating large profits.
Authorities maintain the new licensing scheme and expanded enforcement powers are designed to dismantle those supply chains and protect legitimate businesses.
But with illicit tobacco stores continuing to operate openly in a number of Melbourne suburbs, the scale of the challenge facing regulators remains significant.
In many cases, it is the soaring cost of legal cigarettes that is driving the rise of black-market tobacco stores, with many smokers turning to underground sellers as prices for government taxed products continue to climb.
