Can ChatGPT do your tax return? Here's where AI gets it wrong

Millions of Australians are using ChatGPT and other AI tools to help prepare their tax returns, but experts warn the technology can make costly mistakes that could delay refunds, trigger ATO scrutiny or even result in financial penalties.

From suggesting tax deductions to explaining tax rules, AI is increasingly being used as a digital tax assistant.

But the Australian Taxation Office warns that AI-generated information can be inaccurate, outdated or based on overseas tax laws, leaving taxpayers responsible for any mistakes.

With one in two Australians open to using AI at tax time, the big question is whether the technology can boost your refund, or land you in hot water with the ATO.

"As Australians prepare their tax returns for the 2025-26 financial year, many are navigating a much more complicated income environment shaped by hybrid work, side hustles, digital platforms and AI-driven work opportunities," says Angel Zhong, a professor of finance at RMIT University.

A 2024 Compare Club survey found that one in two Australians would consider using artificial intelligence to help prepare their tax return.

So can AI help boost your tax refund, or is it a shortcut that could land you in trouble with the ATO?

How Australians are using ChatGPT and AI for tax returns

There are at least two different ways that taxpayers are harnessing artificial intelligence to help with their returns: through generative AI tools or via AI-powered tax apps.

For instance, Zhong says that more Australians are using generative AI tools - like ChatGPT and Claude - to provide them with tax deductions related to their role or specific expenses.

There are also a number of dedicated tax apps boasting AI-powered functions such as the ability to search through bank account statements or receipts to find applicable deductions.

When AI can help with your tax return

Rather than dismissing it outright, Mark Chapman, director of tax communications at H&R Block, says that AI can be useful for people wanting to organise their information and get to grips with tax concepts.

"AI can help taxpayers create checklists of documents they need before lodging, explain common deductions in plain English, summarise ATO guidance, or help categorise expenses.

"Someone working from home might ask an AI tool what records they should keep to support a work-from-home claim, while a rental property owner could use it to understand the difference between repairs and capital improvements.

"AI can also be useful for prompting taxpayers to think about deductions or income sources they may otherwise overlook."

It may also help taxpayers organise receipts, understand ATO terminology and prepare questions for a tax agent.

Chapman emphasises that while AI can work well as a research and educational tool, taxpayers shouldn't see it as a substitute for professional advice or as a definitive source of tax law though.

Despite growing interest in AI at tax time, many Australians remain cautious about relying on the technology.

ATO warning about AI-generated tax advice

The biggest risk with AI-generated tax advice is that it can sound convincing while still being wrong.

"AI can be helpful, but it often draws from a broad and inconsistent range of sources, which can lead to inaccurate advice," says Anita Challen, assistant commissioner at the Australian Taxation Office (ATO).

"For example, it could be drawing content about tax obligations or laws from outside of Australia or outdated sources."

The same risk can apply to deductions, with the potential for AI to either make them up entirely or suggest deductions that may not be relevant to an individual.

"A taxpayer might ask whether they can claim a particular expense and receive a general response suggesting it is deductible," Chapman explains.

"However, the AI may not explain that the expense must be directly connected to earning assessable income, that private use must be excluded, or that specific substantiation requirements apply.

"Rental properties are another area where mistakes can occur. AI may correctly identify that certain expenses are deductible but fail to distinguish between an immediately deductible repair and a capital improvement that must be claimed over time."

Can AI mistakes cost you money?

Using incorrect advice or information when preparing a tax return may sound like a harmless mistake, but it can have real consequences.

For example, claiming a deduction you aren't entitled to, or incorrectly categorising a rental property expense, could result in the ATO adjusting your return, reducing your refund or requiring you to repay money.

If the ATO finds out, it could result in a delayed refund - or worse, a financial penalty.

"Tax misinformation often sounds convincing, but dodgy tax advice doesn't just mislead - it can also lead to significant penalties," Challen says.

"Taxpayers remain accountable for ensuring the information they or their agents provide to the ATO is accurate - whether the advice came from a friend, online sources or if AI tools were used in its preparation."

Listen: Friends With Money: Tax time 2026

Is it safe to upload tax information to ChatGPT?

Even if the tax advice is accurate, experts say Australians should think carefully before uploading sensitive financial information to AI platforms.

This is not an unknown risk. A survey conducted last year by Adobe found that the biggest impediment to consumers using AI for tax purposes was data and privacy concerns.

"People should think carefully before entering personal information into an AI platform," says Chapman.

"Tax file numbers, bank account details, salary information and other sensitive financial data should not be uploaded into public AI tools unless the user fully understands how that information will be stored and used."

Should you use ChatGPT for your tax return?

While AI can be a useful tool for understanding tax concepts and getting organised, experts warn it should not be relied on as a source of definitive tax advice. Ultimately, taxpayers remain responsible for the accuracy of their returns, regardless of whether the information came from a tax agent, a website or ChatGPT.

When in doubt, check the ATO website or seek advice from a registered tax professional.

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