Using AI to Do Your Investment Taxes? Sharesight Says Think Again
The Australian Taxation Office (ATO) has issued a fresh warning this tax season against relying on AI chatbots and tools to prepare tax returns, as more Australians turn to generative AI platforms for financial guidance amid increasing complexity for individuals filing their investment taxes.
Doug Morris, CEO of Sharesight, the portfolio tracking and tax reporting platform used by investors and accountants across Australia, says he's increasingly seeing investors attempt to 'vibe code' their investment tax calculations using general-purpose AI tools, producing incorrect outcomes that fail to account for the complexities of Australia's investment tax system.
“Accuracy is an obvious concern with AI, particularly with regard to mathematical calculations. But consistency is a bigger problem. Inputting the same information into one AI chat session will produce a different result the next time you try it. Doing your tax requires numerical consistency, like setting your cost base, for example”, says Morris.
As previously stated by ATO Assistant Commissioner Anita Challen, AI can be helpful, but "it often draws from a broad and inconsistent range of sources, which can lead to inaccurate advice". Her message to taxpayers was blunt: your tax return isn't the place for guesswork.
Critically, the ATO has been clear that responsibility for an incorrect return sit with the taxpayer - there is no free pass for a mistake just because a chatbot made it.
Investment tax reporting isn't something AI can guess
For investors specifically, the stakes are higher again. Investment tax reporting depends on precise, transaction-level calculation against current Australian tax law.
Sharesight's own experience working with investors and accountants points to a consistent set of errors when AI tools are asked to calculate investment tax outcomes rather than simply explain concepts:
- Choice of CGT calculation method: Getting FIFO, minimum-gain, or specific-parcel-identification methods wrong can materially change the tax outcome.
- The 12-month CGT discount: Miscalculating holding periods, especially around parcels bought progressively over time or via dividend reinvestment.
- Corporate actions: Mishandling cost base adjustments from stock splits, mergers, demergers, and capital returns, which don't follow a single generic rule.
- Franking credits and dividend reinvestment plans (DRPs): Treating DRP shares as "free" rather than as a taxable dividend event with its own new cost base.
- Foreign income and foreign tax offsets: Applying US, UK, or other jurisdictions' tax treatment to Australian holdings, or missing foreign income tax offset entitlements entirely.
- SMSF-specific treatment: Applying standard individual CGT and income rules to SMSF structures, which are governed by different rates, exemptions, and pension-phase considerations.
- Outdated thresholds and rates: Relying on a training cutoff that predates the current financial year's rates, thresholds, or legislative changes.
The risks aren't hypothetical. Earlier this year, in Smith and Commissioner of Taxation [2026] ARTA 25, the Administrative Review Tribunal criticised a taxpayer who relied on unverified AI-generated legal authorities after some cited cases were fabricated or irrelevant, damaging the taxpayer's credibility.
AI can explain tax concepts but it shouldn't calculate your tax
Morris’ view is that AI has a legitimate role in explaining tax concepts in plain English, but a much more limited one in generating the actual numbers that go on a return.
There is also a data handling dimension to the risk. Feeding sensitive financial details - such as account numbers, holdings or income - into a general-purpose AI tool means that data may be stored, used to train models, or handled in ways that aren't always transparent to users.
The message for investors this tax time is a simple one, “AI can be a useful starting point for understanding tax concepts, but it isn't a substitute for accurate calculation. When it comes to lodging a tax return, investors should rely on trusted tax software or a registered tax professional, not a chatbot."
About Sharesight
Sharesight is an online portfolio tracker that empowers investors by simplifying complex investment data. With over 500,000 users globally, our aim is to provide institutional-level insights to investors of all levels, from beginners to experienced investors and intermediaries like accountants and financial advisers.
