Budget 2014: Duty-free tobacco limits to fall

Update 2018: From 1 November 2014 the limit changed you can see the correct concessions on the New Zealand Customs Website: https://www.customs.govt.nz/personal/travel-to-and-from-nz/duty-free-shopping/

Duty-free tobacco allowances will be cut as a further step towards reducing the harm caused by smoking, Associate Minister of Health Tariana Turia says.

This means that from 1 November this year, the duty-free allowance will fall from 200 cigarettes to 50 cigarettes. The new limit aligns New Zealand with the duty-free tobacco concession that has been in place in Australia since 2012.

“Although it’s pleasing to see that fewer young people are taking up smoking, it still causes up to 5,000 premature deaths in New Zealand every year,” Mrs Turia says.

“The Māori Party has been instrumental in a number of Government initiatives aimed at reducing smoking - including a rise in the tobacco excise tax.

“But it is an anomaly that on the one hand we’re increasing the price, and on the other hand we’re offering a duty-free allowance on 200 cigarettes to every adult arriving at our borders.”

The price differential between retail tobacco and duty-free tobacco will continue to grow with two further 10 per cent increases in the rate of excise scheduled over the next two years, Mrs Turia says.

“I considered recommending that the duty-free allowance be removed entirely, and although that would be consistent with the Government’s goal of making New Zealand effectively smoke-free from 2025, it would not be practical.

“Completely removing the duty-free concessions would mean that smokers, who might have a packet or two of cigarettes on them when going through Customs, had to either dump them or declare them and pay duty. If they did neither, they would risk prosecution and seizure of the goods.

“Either way, it would have potentially created considerable compliance costs for Customs in processing passengers at busy airports. Consequently, the Cabinet has agreed to reduce, rather than remove, the allowance.”

The new duty-free tobacco limit is forecast to raise $50 million in extra revenue over a full financial year.

“It makes sense for us to match Australia’s duty-free limits for tobacco, given that nearly half of all our inbound passengers come from, or via, Australia,” Mrs Turia says.

Along with the reduction in the duty-free concession, from 1 November tobacco will be removed from the gift concession that currently allows gifts sent from overseas to be free of duty and GST when they arrive in New Zealand, providing they exceed no more than $110 in total value.

Budget 2014 will include additional funding for New Zealand Customs Service of $2.7 million in 2014/15, and $420,000 in the following years to assist with implementation of the new rules.

Key facts on changes to the duty-free tobacco limits

From 1 November 2014, New Zealand will make the following changes to its duty-free tobacco limits:

  • The duty-free tobacco allowance for passengers arriving in New Zealand will fall to 50 cigarettes, or 50 grams of cigars or tobacco products. This will bring New Zealand’s limits in line with Australia’s.
  • Tobacco products sent to New Zealand as a gift from abroad will no longer be eligible for the $110 duty-free gift allowance. This means all gifts of tobacco products sent to New Zealand will now be subject to excise duty and GST.

These changes will help to eliminate cheaper avenues for smoking, which are out of step with recent initiatives to make New Zealand effectively smoke-free by 2025.

What are the current limits for duty-free tobacco?

The international traveller’s allowance:
Passengers arriving in New Zealand aged 18 or over can currently bring up to 200 cigarettes, 250 grams of tobacco, 50 cigars (or a mixture of all three weighing up to 250 grams) into New Zealand free of duty and GST. This is providing that the goods are brought through the Customs arrival process and:

  • are for personal use, or are intended as gifts
  • are not carried on behalf of another person
  • are not intended for sale or exchange.

The gift allowance:
Tobacco products sent to New Zealand as a gift (or as part of a gift) from abroad are exempt from duty and GST, providing the total value of the gift is below $110.

How are these rules changing?

The current rules for both the traveller’s allowance and the gift allowance will remain in place until 31 October 2014. However, from 1 November 2014:

  • the traveller’s duty-free allowance will fall to 50 cigarettes, or 50 grams of cigars or tobacco products, and
  • tobacco products sent as a gift from abroad will now be subject to tobacco excise and GST.

What does this mean in practice?

The international traveller’s allowance:
As under the current rules, incoming passengers will be required to declare (on their passenger arrival card) whether they intend to bring in any dutiable goods in excess of the available allowances. In the case of tobacco products, this means that passengers carrying more than the new limit will need to declare this, and pay the relevant duty and tax on the excess amounts, or forfeit these excess amounts at the Customs controlled area.

If passengers opt to pay the relevant charges, tobacco excise duty is levied according to the weight of tobacco content and (in the case of cigarettes) the number of cigarettes. GST is then levied at 15 per cent of the combined value of the goods and duty. As under the current rules, if passengers fail to declare dutiable goods, the goods will be confiscated and passengers may be prosecuted.

The changes to the traveller’s duty-free tobacco allowance will not affect outgoing international travel. Outgoing passengers will still be able to purchase duty-free tobacco from New Zealand duty-free stores in accordance with the overall limits specified by their destination country.

The gift allowance:
Under the new rules, all gifts sent from abroad containing tobacco products will be held by New Zealand Customs Service, and the recipient will be notified of the outstanding charges (which will be calculated as above). Once these have been paid, the goods will be released to the recipient.

Why are we changing the duty-free tobacco limits?

New Zealand is seeking to reduce the prevalence of smoking with the aim of making the nation essentially smoke-free by 2025.

With this goal in mind, the Government has put in place regular annual increases in the rate of tobacco excise, with two further 10 percent increases in place for the next two years. The intention of this policy is to send a strong signal to consumers of the health effects of smoking via higher prices.

As things stand however, the current duty-free allowances allow for significantly cheaper avenues of smoking which are out of step with the Government’s broader measures. The new rules will help to close these anomalies, thereby reducing the opportunities for cheaper smoking.