Federal Budget Faces $24 Billion Shortfall Linked to Tobacco Tax Decline
Australia’s Federal Budget is set to experience a significant shortfall, estimated at $24 billion in the coming years, largely attributed to ongoing issues with black market tobacco in Victoria. The production and importation of illicit tobacco have severely impacted government excise revenue, prompting a reassessment of expected income from tobacco taxes.
During the recent budget announcement, officials revealed a downgrading of tobacco excise receipts by $6.9 billion from 2024-25 to 2028-29. Recent data indicates a staggering $1.3 billion reduction in estimated tobacco excise over just three months, a drop of 15.4 per cent. For context, while tobacco tax projections fell sharply, beer excise forecasts rose slightly by $30 million, or 1.1 per cent.
In response to the growing issue of illegal tobacco sales, the government has allocated $156.7 million over two years, starting from 2025-26, to bolster measures aimed at curbing the illicit trade in tobacco products.
Additionally, the budget anticipates a $1.9 billion reduction in company tax revenues over the same timeframe, largely due to forecasted declines in profits for non-mining businesses. Coupled with the introduction of new personal income tax cuts, the government expects this will result in a $259.1 million decrease in tax receipts for the current financial year, escalating to a total decline of $15.1 billion across the years from 2024-25 to 2028-29.
This combination of factors signals a challenging financial landscape for the government, with significant implications for future budgeting and economic forecasts.