AI Tax Tips: Helpful Shortcut or Costly Trap?

As a business owner or investor, time is always tight. So, it’s no surprise many people now turn to AI tools like ChatGPT for quick answers on tax deductions, super contributions or structuring ideas. The responses sound confident, arrive instantly and cost nothing. What could go wrong?

Plenty.

The Australian tax and super system is complex, highly fact-specific and constantly changing. While AI can be a useful starting point, relying on it for decisions can expose you to audits, penalties and poor financial outcomes. We’re increasingly seeing the clean-up work when AI advice goes wrong.

Where AI Can Help (and Where it Can’t)

AI is quite good at explaining basic concepts in plain English. It can help you understand what “negative gearing” means, outline the difference between concessional and non-concessional super contributions, or prompt you to think about record-keeping. Used this way, it can save time and help you ask better questions.

The problem starts when AI moves from explaining concepts to giving “advice”.

Tax and super outcomes depend on your specific facts: your income levels, business structure, age, residency status, assets, timing and future plans. AI does not know these details unless you provide them—and you generally shouldn’t. Even then, it cannot exercise judgement or balance competing risks the way an experienced adviser can.

The Accuracy Risk: Confident, but Wrong

AI tools are known to “hallucinate” – that is, provide answers that sound authoritative but are incorrect or incomplete. In practice, this can mean:

• Claiming deductions that don’t apply to your circumstances
• Miscalculating capital gains tax or ignoring integrity rules
• Suggesting super strategies that breach contribution caps or eligibility rules
• Quoting legislation, cases and rulings or concessions that don’t exist or are out of date.

These errors are rarely obvious to a non-expert, but they are normally obvious to the ATO, courts and experienced advisers.

A recent decision handed down by the Administrative Review Tribunal highlights some of the key problems. In Smith and Commissioner of Taxation [2026] ARTA 25 the taxpayer appeared to rely on AI tools to identify cases which supported their argument, but this approach was shot down by the Tribunal. Some of the cases didn’t exist and others were simply not relevant to the matter being considered.

If the person using the AI tool doesn’t verify the existence of the cases provided by the tool and read them to ensure their relevance then “the Tribunal’s resources are being wasted, as the Tribunal must look for cases that don’t exist and read cases that have no relevance at all”.

ATO Scrutiny is Increasing, not Decreasing

The ATO isn’t anti-AI—they use it internally for fraud detection and analytics. But for you? The ATO’s misinformation guide makes it clear that AI tools can provide false, inaccurate, incomplete or outdated information. The ATO’s message is to verify everything, or face the music. Surveys reveal 64% of businesses seek AI accounting help first, only for pros to unscramble the mess—wasting time and money.

ATO AI transparency statement | Australian Taxation Office

Protect yourself from misinformation and disinformation | Australian Taxation Office

When something is wrong, the ATO will generally amend the return, charge interest and may apply penalties—even if the mistake came from AI advice rather than intent.

We are seeing this play out most clearly with work-from-home claims, property deductions and SMSF compliance.

Superannuation: High Stakes, Little Margin for Error

Super is an area where AI advice can be particularly dangerous. Self-managed super funds, in particular, operate under strict rules. AI often overlooks key issues such as eligibility, timing, purpose tests and investment restrictions. The result can be non-compliance, forced unwinding of transactions and penalties that run into thousands of dollars.

Super mistakes can also permanently damage your retirement savings.

Data Security and Privacy

There is also a practical risk many people overlook: entering personal or financial information into AI platforms. Once data is entered, you lose control over how it is stored or used. This creates privacy and fraud risks that are simply not worth taking.

A Smarter Approach: AI Plus Professional Advice

AI is best used as a support tool, not a decision-maker. It can help you understand the landscape, but important tax and super decisions should always be reviewed in light of your full circumstances.

At our firm, we encourage clients to bring questions early, test ideas and have conversations before acting. That approach almost always costs less than fixing problems after the fact.

The bottom line: AI can be a helpful assistant, but it is not your accountant. When it comes to protecting your wealth and staying compliant, tailored professional advice remains essential. Feel free to contact our team at Paris Financial should you have any questions.

Note: The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone.  If expert assistance is required, professional advice should be obtained.