Beyond the Hype: Is AI Your Next Tax Assistant This EOFY?
The AI buzz at tax time
As the End of Financial Year approaches in Australia, discussions about tax are intensifying. In recent years, this conversation has inevitably evolved to include artificial intelligence.
From sophisticated chatbots to smart tax applications, AI is increasingly integrated into daily digital experiences, leading taxpayers to question: Is AI their next tax assistant, or a potential liability?
Below, we cut through the hype to explore what AI can realistically offer the Aussie taxpayer. We’ll look at the limitations of AI in tax preparation and highlight what it should not be relied upon for. This discussion also incorporates guidance directly from a tax professional, as well the Australian Taxation Office (ATO) and other government bodies, offering actionable advice to help individuals navigate tax time safely and effectively, ensuring compliance and protecting personal financial info.
AI as tax assistant
AI-powered tools are proving very effective at automating many of the tedious and time-consuming admin tasks associated with managing one’s finances — including tax prep. ChatGPT, Gemini and other AI-powered tools can efficiently extract information from various financial documents, such as PAYG summaries, bank statements and invoices. This capability significantly reduces the manual effort traditionally required to gather and input data for a tax return.
The ATO already facilitates tax preparation by providing pre-filled data directly from employers, banks and other government agencies. AI tools can further assist in verifying and organising this pre-filled information, ensuring its accurate reflection in a tax return. Platforms such as Lodge Pro and Thriday leverage AI for advanced expense classification. These systems can analyse bank statements and scan receipts to automatically categorise items into appropriate tax-deductible categories, potentially saving hours of manual sorting and data entry.
AI can also analyse expenses and suggest possible deductions that an individual might be eligible for, often based on their industry, occupation and work-related purchases. Some tools can even scan physical receipts and automatically categorise them for potential deductions.
This automation represents AI's most immediate and tangible benefit for the average taxpayer. It directly addresses the often overwhelming and error-prone nature of manual data entry, freeing up valuable time and potentially reducing simple transcription mistakes.
What AI cannot do
Relying solely on AI for tax advice or preparation without robust human oversight carries serious risks, particularly because Australian tax rules are not only intricate but also subject to frequent updates. AI models can struggle to interpret these nuances and may be trained on outdated datasets.
A fundamental principle in Australian tax law is that AI cannot legally file a tax return. In Australia, only registered tax agents or individuals themselves can lodge a tax return. Consequently, all AI-generated suggestions, calculations or categorisations still require thorough human review to ensure full compliance with complex and ever-evolving ATO rules.
The Office of the Australian Information Commissioner (OAIC), a key government body, provides this recommendation: individuals should not input personal information, and particularly sensitive financial information, into publicly available chatbots and generative AI tools. The OAIC highlights that using such public tools for sensitive data involves "significant and complex privacy risks". A major concern is that many of these tools operate overseas or through third-party platforms. This means highly sensitive information, such as Tax File Numbers (TFNs) and bank details, could be stored in unknown locations, potentially outside Australian jurisdiction and privacy protections. A data breach involving personal and financial details can have devastating consequences for individuals, including identity theft and financial fraud.
Finally, a significant and widely acknowledged limitation of AI, particularly generative AI, is its propensity to "hallucinate" — that is, to produce inaccurate, false or nonsensical results while presenting them confidently and as factual. This risk is especially high because generative AI is probabilistic in nature and does not genuinely "understand" the data it handles or generates. In other words, AI may not always fully grasp or correctly interpret complex tax situations, such as those involving capital gains, trusts or intricate business income structures.
Always verify, always review
But what do the professionals think?
“Whether it’s a handheld calculator or sophisticated software, using tech to support the management of your finances is fine,” Brian Liu, Founder of accounting firm Liu & Associates, says. “But always remember that your tax is your responsibility. If there is a problem, you are answerable to the ATO — not the tools you’ve used. The buck always stops with you.”
No matter how sophisticated the AI tool used, a tax return is the individual's responsibility — the ATO holds the taxpayer accountable for its accuracy and compliance. AI is a powerful tool, capable of immense efficiency, but it is only as effective as the data it is given and the human oversight it receives. Active participation and critical review are non-negotiable.
The following checklist provides actionable steps for safe and effective AI use this EOFY:
| Action Area | DO (Recommended Action) | DON'T (Action to Avoid) |
|---|---|---|
| Data Input | Use AI for basic data entry and document organisation | Input sensitive personal financial information into publicly available AI chatbots |
| Advice Seeking | Use AI for general tax questions (e.g., MyTax navigation) | Rely on AI for complex tax situations or personalised tax advice |
| Tool Selection | Choose secure, reputable, purpose-built Australian tax software with privacy commitments | Assume AI will perfectly optimise your tax outcome without human oversight |
| Security | Maintain strong cybersecurity practices (password manager, 2FA, updates) | Blindly trust AI-generated information; always apply scepticism |
| Verification | Verify all AI advice with official ATO sources (ato.gov.au) or a registered tax professional | Let AI replace your own understanding or the need for professional advice |
| Scam Awareness | Be vigilant against AI-powered scams (deepfakes, fake agents, phishing) | Click on hyperlinks in unsolicited messages, even if they appear realistic |
Final Thoughts: Your Tax Return, Your Responsibility
AI offers exciting possibilities for streamlining many elements of your life — including in your tax preparation, acting as a valuable assistant for data management and initial categorisation. However, it is paramount to verify any information obtained from AI with official ATO sources, exercise extreme caution with personal financial data and remember that the ultimate responsibility for an accurate and compliant tax return rests squarely with the individual - that is, you.
When in doubt, consulting a registered tax professional remains an invaluable step. Their nuanced understanding of Australian tax law, ability to handle complex situations and commitment to specific circumstances ensure peace of mind and full compliance.
Further Reading
OAIC: Guidance on privacy and the use of commercially available AI products
ATO: Protect yourself from misinformation and disinformation
*Note that the above does not represent financial advice.
For expert advice on how to leverage AI — for personal or business needs — get in touch today.
