02-07-2025
AI is a double-edged sword when it comes to tax returns. Here's what Australians should know
As tax time approaches, Australians have been warned that artificial intelligence (AI) could backfire if overused.
Experts say that using AI for taxes is convenient, but it also carries risks, especially when relying heavily on the technology.
Should you use AI to calculate your tax return? It depends on your circumstances and the AI tools you use.
Here is what to know.
There are two types of AI tools that people generally use: free basic tools like ChatGPT, and bespoke tax-specific AI tools.
"A lot of people, when they hear AI now, they think of something like ChatGPT, something where you type in a question or you paste in a document and it gives you some answers," Shaanan Cohney, a senior lecturer in cybersecurity at the University of Melbourne, said.
"Traditionally, in the field of tax preparation, AI is much more under the surface and not something that you might even be aware you're using," Dr Cohney said during an ABC interview.
Professor Stan Karanasios from the University of Queensland Business School told the ABC that in Australia, various AI-powered applications were available to help individuals with their tax returns.
"These tools are marketed as assisting with tasks such as expense classification and may even connect to users' bank account data to streamline data collection."
"They frequently promote themselves as tools to maximise tax refunds," Professor Karanasios said.
In essence, AI can handle tedious tasks like data entry for the general public, while financial professionals are using AI to enhance their services.
"For example, an Australian taxpayer might use a chatbot to clarify what work-from-home expenses are deductible, getting instant answers without waiting on hold for the tax office," Dr Walayat Hussain, an Associate Professor from the Faculty of Law and Business at the Australian Catholic University, said.
"By automating repetitive data processing and research, AI allows accountants to spend more time on complex advisory work and reviewing the results for accuracy," he told the ABC.
Professor Jennie Granger, from the Business School of UNSW, said that for people with simple financial affairs, AI could make tax time easier and faster.
She added that AI "has an impressive ability to analyse issues, apply the law and respond in straightforward language".
The Australian Taxation Office has admitted it uses AI when calculating Australians' tax bills, saying it helps staff to "quickly process large volumes of complex data to identify insights and risks".
However, Individuals with limited tax knowledge or more complex financial circumstances have been urged to exercise caution when using AI for their tax returns.
"Tax returns are serious accountability documents that taxpayers are obliged to accurately complete based on evidence," said Associate Professor David Morrison from the School of Law at the University of Queensland.
"It is important to note that when using AI for information gathering and suggesting, AI simply 'scrapes' information when it has no deep insight, and that in turn might be misleading to rely upon," he said.
One of the other issues is the accuracy and relevance of the information AI provides, with the risk of using generalised advice that doesn't apply to everyone.
"It is only as good as your own understanding of what data is in your statements," said Professor Granger from UNSW.
"So, it would be wise to use this type of tool to complement your analysis, not replace it."
She said, like Google, AI "does not remove the need for you to exercise your own judgement, including a good dose of scepticism".
AI tools such as ChatGPT can also give outdated or irrelevant answers, sometimes for the incorrect financial year or even for the wrong country. This could cause trouble for taxpayers.
Professor Karanasios from the University of Queensland emphasised the importance of being mindful of the current limitations of AI tools.
"Some may offer faster processing, help maximise returns, or assist more broadly with financial management," he said.
"But they are also prone to errors.
"At the end of the day, the responsibility for lodging a tax return lies with the individual. AI is not the one submitting the return."
Stay informed and cautious.
While AI tools can offer valuable support, especially for record keeping and simple deductions, they are not a substitute for professional judgement.
Ronnie Das, an Associate Professor from the University of Western Australia Business School, urged taxpayers to take care before adopting any advice provided by AI.
"AI is fine for general advice, [such as] clarifying doubts and interpreting a complex tax law," he told the ABC.
Dr Shaanan Cohney from the University of Melbourne agreed, adding that he "is using it [AI] as an exploratory tool to help understand scenarios potentially better".
"AI right now is a powerful tool for learning," Dr Cohney said.
"It is not yet the right tool for most people to rely on when in high-risk scenarios where thousands or potentially even hundreds of thousands of dollars are on the line."
Disclaimer: this article is not intended as tax return advice.
