ChatGPT tax tips could cost Australians at tax time, ATO warns

Australians have long been warned not to take tax advice from a mate at a barbecue. Now the Australian Taxation Office has another warning: do not rely on ChatGPT at tax time.

ATO second commissioner Jeremy Hirschhorn has warned taxpayers against using artificial intelligence tools to claim deductions or challenge tax office decisions, saying they can produce answers that sound convincing but are wrong.

“ChatGPT is a bad tax adviser,” Mr Hirschhorn said at the recent Australian Shareholders’ Association conference.

“Tax is so nuanced and ChatGPT is basically an averaging machine. It will average Australian tax advice with US tax advice, and the historical Australian tax system with the current tax system.”

The warning comes as the ATO prepares for tax time and expects more Australians to turn to AI, “finfluencers”, and online hacks to maximise refunds.

Financial comparison site Compare Club surveyed 1000 people in October and found 31 per cent were using AI tools to complete their tax returns.

ATO assistant commissioner Anita Challen said taxpayers should be wary of advice from AI platforms, online personalities, family, and friends.

“Your tax return isn’t the place for guesswork,” Ms Challen said.

Taxpayers remained responsible for their return, even if a wrong claim was based on AI-generated advice, the ATO said. Bad advice can lead to delays, amended returns, compliance action. and penalties.

One risk is that ChatGPT can give a generic answer to a nuanced tax problem.

Drew Pflaum, a former tax adviser and founder of tax AI platform SavvyWise, said the answer depended heavily on the question.

“The query is really important,” he said. “If you had a tax issue, the way the average Aussie would write it would be completely different to how a tax adviser would write it.”

Mr Pflaum gave the example of a landlord who spends $20,000 removing asbestos from the roof of a rental property.

If the owner asks ChatGPT broadly how to claim the expense, the tool might treat it as capital works, deductible over time at 2.5 per cent a year. On a $20,000 expense, that is about $500 a year.

But a tax accountant may ask the question differently: “If the roof was not damaged and the work was done because asbestos was hazardous, could the cost be claimed immediately under environmental protection rules?”

That more precise prompt could lead to a very different answer: an immediate $20,000 deduction.

The ATO said it was also seeing AI-generated objections, where taxpayers challenged decisions using pages of “legal-ish” language.

Mr Hirschhorn said that could help people dispute matters they otherwise could not afford to pursue, but it was also creating poor-quality arguments.

“I think ChatGPT is very friendly. It will always tell you that you’re right and help you,” he said. “But this is a challenge of people getting bad advice.”

The warning lands as the ATO focuses on work-related deductions, expenses, and omitted income this tax time.

Its basic rules remain unchanged: the expense must be linked to earning income, paid by the taxpayer, not reimbursed, and backed by records.