As of July 2007, smoking in enclosed areas of pubs and clubs across NSW has been banned.
The NSW Government said the legislation had been "very successful".
The Minister Assisting the Health Minister for cancer, Verity Firth , said the primary aim of the Smoke Free Environment Act was to protect staff and patrons who choose not to smoke.
"In over 1000 snap inspections of licensed premises since the laws came into effect, we have
found compliance to be extremely high," she said.
"Pubs, clubs and the community should be commended for taking the spirit of the laws to heart.''
But the operators of the licensed venues say the laws have only compounded their financial woes.
ClubsNSW, which is the peak body for venues across the state, said clubs suffered their worst financial year ever, with overall club income falling by $385 thmillion in the last financial year.
Figures from Office of Liquor, Gaming and Racing estimate a revenue downturn of $26,052,814 in the Parramatta area - a fall of 11.7 thper cent.
Chief executive of Club Marconi in Bossley Park, Debbie Feening , said all her colleagues across the state were "doing it tough".
"[The smoking laws] have certainly affected our revenue - people used to enjoy coming to a
club,'' she said.
"It's a combination of a few things like an increase in gaming tax, the economy at the moment, the smoking laws, interest rates and petrol prices.
"Most of our members do smoke so it's had an affect on us with such a cold winter they don't like smoking in the cold.''
Gaming Minister Graham West said any club that lost more than 14 per cent of income would be entitled to delayed tax payments.
But Greens MP Lee Rhiannon said it was inconsistent to offer clubs tax lifelines but not other businesses.
"For too long clubs in NSW have made a mint from people's gambling and smoking addictions,'' she said.
The government plans to introduce laws that require all tobacco products to be stored out of sight in shops and smoking in cars when children are passengers will be banned and attract a $250 on-the-spot fine.
Policy and advocacy manager at the Cancer Council NSW Anita Tang, said: "This is a great move forward that will help reduce smoking rates now and for future generations, and as a consequence see a reduction not only in lung cancer but also in other forms of cancer related to smoking.''