Federal Treasurer Jim Chalmers has announced a targeted funding commitment to help state and territory governments crack down on the surging illegal tobacco trade, following days of intensifying pressure from state treasurers and law enforcement agencies across the country.

The package, understood to include additional Australian Border Force resources and co-funding for state-based strike teams, comes after several state governments warned that existing enforcement budgets were insufficient to combat sophisticated criminal networks supplying untaxed cigarettes to convenience stores and market stalls nationwide.

Chalmers, speaking ahead of the end-of-financial-year budget cycle, framed the commitment as both a revenue protection measure and a public health priority. 'We are losing hundreds of millions of dollars in excise revenue while criminal organisations profit,' Chalmers told reporters in Canberra. 'This is a joint problem that requires a joint response, and the Commonwealth is prepared to step up.'

State revenue offices have been lobbying Treasury for several months, citing a sharp rise in seized illegal tobacco products and the limitations of state-only enforcement operations. Victoria and Queensland in particular had publicly called for a nationally coordinated taskforce with dedicated Commonwealth funding.

The announcement is expected to be formally incorporated into the May federal budget, but Tuesday's commitment signals the government's intent to act before the next election cycle. Opposition treasury spokesman Angus Taylor criticised the timing, arguing the Albanese government had been 'slow to act on a well-documented crisis' and that the funding should have been allocated in the previous budget.

Industry groups welcomed the move but cautioned that funding alone would not resolve the issue without stronger penalties for retailers found stocking illegal product. Anti-smoking advocates also expressed qualified support, noting that cheaper illicit cigarettes undermine public health campaigns aimed at reducing smoking rates.