If you have typed a tax question into ChatGPT, Gemini or any other AI tool, and received a confident, well-structured answer within seconds, you're not alone. Surveys suggest the majority of small business owners now regularly turn to AI for accounting and tax guidance.

The appeal is obvious. But the Australian tax system is not a subject where confidence and accuracy reliably go together — and the consequences of acting on incorrect AI advice can be expensive.

Where AI can genuinely help

AI tools are effective at explaining concepts in plain English. Understanding what negative gearing means, the difference between concessional and non-concessional super contributions, or the general framework of a tax concession. AI can give you a useful starting point for all of these.

The problem begins when AI moves from explaining concepts to giving advice. And that transition is rarely obvious.

The accuracy problem: Confident, but wrong

The term 'hallucination' describes the tendency of AI models to generate information that sounds authoritative but is incorrect, misleading, invented or out of date.

In a tax context this can mean:

• Referencing a deduction or concession that exists in another jurisdiction but not in Australia.
• Citing an ATO ruling, court case, or piece of legislation that does not exist, or that has been superseded.
• Applying rules correctly in isolation but missing an integrity provision that changes the outcome.
• Providing an answer that was accurate when the AI was trained but is now out of date.

These errors are not always obvious. But they are typically obvious to the ATO, a tax tribunal, and any experienced adviser who has to correct the problem.

The ATO's position

The ATO uses AI internally for fraud detection and analytics. But its public guidance is clear: AI tools can produce false, inaccurate, incomplete and outdated tax information. The responsibility for the accuracy of a tax return rests with the taxpayer. When something is wrong, the ATO will amend the return, apply the General Interest Charge, and may apply a shortfall penalty, even if the error came from AI advice.

High-risk areas

• Work-from-home deductions: Rules have changed in recent years and AI tools frequently provide outdated or jurisdiction-incorrect guidance on what can be claimed.
• Property deductions and CGT: The interaction between rental property deductions, the main residence exemption, and CGT calculations is fact-specific and complex. AI tools routinely miss critical nuances.
• SMSF compliance: SMSF compliance depends heavily on the specific facts of each fund's situation. AI tools are poorly suited to this area, and errors can have severe and difficult-to-reverse consequences.

Our suggestion

If you have acted on AI-generated tax or super advice in the past 12 months and have not had it independently reviewed, please contact us. We can quickly assess whether the position is sound or whether it needs to be corrected before it becomes a larger problem.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044.