Smokers can expect to pay $40 for a packet of cigarettes after a hike in tobacco tax was confirmed on Tuesday.

Federal Finance Minister Mathias Cormann confirmed the increase of tobacco excise which is set to increase by 12.5 per cent annually until 2020, according to The Courier-Mail

Initially proposed by Labor, the opposition was forced to defend a $20 billion black hole in its funding policy after a leaked federal budget document revealed a shortfall in the expected revenue from taxing smokers.

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Federal Finance Minister Mathias Cormann confirmed the increase of tobacco excise which is set to increase by 12.5 per cent annually until 2020

Smokers can expect to pay $40 for a packet of cigarettes after a hike in tobacco tax was confirmed on Tuesday

Initially proposed by Labor, the opposition was forced to defend a $20 billion black hole in its funding policy after a leaked federal budget document revealed a shortfall in the expected revenue from taxing smokers

Shadow assistant treasurer Andrew Leigh says Labor used official costings from the Parliamentary Budget Office and they will provide updated figures closer to the election.

'This is a desperate government that has adopted a Labor policy and that is now looking to fearmonger about it,' Dr Leigh told ABC radio on Tuesday.

Mr Cormann said the government's assumptions for calculating the tax from cigarettes would be released in the federal budget on Tuesday night.

Shadow treasurer Chris Bowen says the Parliamentary Budget Office would update Labor's policy costings after the budget and again after the pre-election fiscal statement

Shadow treasurer Chris Bowen also denied the revenue from tobacco taxes would go directly to schools, saying it was just one of Labor's planned savings

'Labor has never released what their assumptions or constructions were,' he told ABC radio.

Shadow treasurer Chris Bowen says the Parliamentary Budget Office would update Labor's policy costings after the budget and again after the pre-election fiscal statement.