Table of contents
Your professional obligations, and risks, as a tax agent
Tax agents are required to:
- provide competent tax agent services
- maintain relevant knowledge and skills and
- take reasonable care to ensure tax laws are correctly applied (under s 30-10 of the Tax Agent Services Act 2009).
Tax agents that fail to comply with these requirements are subject to disciplinary action by the Tax Practitioners Board under s 30-15 of that Act which can involve:
- a written caution
- an order to complete further education or training or to work under supervision; or an order limiting the scope of services that the agent can provide or requiring the agent to notify all their clients of the disciplinary action
- suspending the agent’s registration for a period of time or
- terminating the agent’s registration, significantly impacting the ability to continue practicing.
For examples of such disciplinary action, see Norman v Tax Practitioners Board 2021 AATA 848 and Lecky v Tax Practitioners Board 2025 ARTA 119.
A tax agent who makes a false or misleading statement to the Commissioner may be liable to a civil penalty under s 50-20 of that Act which, for an individual, is $82,500 and, for a body corporate, is $412,500. He or she may also have committed an offence under s 8K ($6,600 penalty for a first offence) or 8N ($9,900 for a first offence) of the Taxation Administration Act 1953.
Tax agents may also be sued by their clients under common law for breach of contract or negligence for incorrect advice, resulting in costly awards of damages.
Your professional obligations, and risks, as a solicitor
Similar obligations apply to solicitors under the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015 (covering NSW, Vic and WA; there are similar rules in other jurisdictions):
- under rule 4, solicitors must deliver legal services competently, diligently, and as promptly as reasonably possible and
- rule 7.1 requires a solicitor to provide clear and timely advice to assist a client to understand relevant legal issues and to make informed choices about action to be taken.
A breach of rule 4 or 7 may constitute unsatisfactory professional conduct or, in more serious cases, professional misconduct and these penalties may apply:
- a caution or reprimand
- fines (up to $25,000 for unsatisfactory conduct)
- conditions imposed on the solicitor’s practising certificate
- suspension or cancellation of practising certificate or
- removal from the roll of legal practitioners.
Solicitors may owe duties of care to their clients in both tort and contract and may be sued for negligence or breach of contract, with the awarding of damages against them.
How relying on free and low-cost AI technology puts you at risk
The role of tax and legal professionals is to help their clients navigate the complexities of regulatory compliance and legal obligations, whilst ensuring the best outcome based on their clients’ unique circumstances. At the heart of this role are two core functions: advising the client by recommending a course of action, outlining the potential risks and benefits; and ensuring compliance obligations are met by completing forms or tax returns on the client’s behalf.
To perform this role to the standards required by the governing legislation you must act competently and with reasonable care. This is why it is crucial that the research materials you use as the basis of your advice or compliance activities are comprehensive, accurate and up to date so that you can trust the results. Relying on free or low cost solutions puts you at risk of providing the wrong advice or completing compliance tasks with inaccurate information; alternatively, you or your staff have to spend additional time validating the answers from other sources to minimise the risk of providing inaccurate advice to your clients.
Out of date data sets
Some free or low-cost AI tools are trained on static data sets that are from a particular point in time and not updated. This limitation is often not transparent to the user. As a result, the answers they provide can be out of date and inaccurate as they are generated from a content set that does not have the most recent sources of information. This can include missing substantial legislative update or a crucial rate or threshold change.
Wrong jurisdiction
Free or low-cost AI tools do their best to find an answer, any answer. That can include composing an answer based on information from another jurisdiction within Australia or even from another country. On the surface, these answers appear accurate but do not reflect the correct law for your client’s situation.
Hallucinations
Generative AI is prone to hallucination, producing an answer that reads as authoritative but which is actually totally false. This extends to creating fictitious court cases that support a client’s position – cases that do not in fact exist. Lawyers in Victoria and NSW have been reprimanded for using AI technology which invented fictitious cases that they relied upon in court proceedings. See also Body by Michael Pty Ltd v Industry Innovation and Science Australia where the taxpayer was reprimanded for submitting fictitious cases generated by AI in support of his application for the research and development tax offset.
Privacy and security
There are also significant privacy and security concerns when using free or low-cost AI technology. Tax agents and legal professionals must generally seek client permission before disclosing any of their information to third parties, including AI tools. Despite training and guidelines, there is always a risk that sensitive or confidential data relating to your clients or firm may be uploaded into the AI tool.
Not all AI tools have the same level of privacy and security and some may:
- be vulnerable to unauthorised access or hacking if they do not store or transmit data securely
- acquire personal or usage data without clear consent and without being transparent about who has access and how it is used or
- share data with third parties without explicit consent.
Once lost, such data can never be retrieved and, if client information is involved, the loss of trust may also never be retrieved.
When accuracy matters, trust isn’t optional
Adopting AI technology for your professional practice is a business investment decision that must be implemented with due consideration for the risks and benefits. Short term cost savings might improve the immediate bottom line but could have long-lasting negative impacts on your business and reputation, and expose you to financial penalties.
Wolters Kluwer has a global division of expert engineers and developers dedicated to creating the best AI solution in the market for tax and legal professionals, complying with world standard protocols around privacy and security. Your data, and your clients’ information, is safe with us. Extensive work has been done to reduce the risk of hallucination in AI generated answers, reinforcing the trust factor.
Already in use in North America, our AI solution will soon be deployed across our award-winning CCH iKnowConnect research platform in Asia Pacific. This AI tool will generate results you can rely on as they are sourced from the extensive content set curated and updated by the subject matter experts at Wolters Kluwer. AI generated answers contain links back to our content set so that you can validate the result, apply the law to your clients’ circumstances and be confident in the advice you are giving. Our content set is updated daily by our experts, capturing the latest changes to ensure that you and your clients are always up to date. This is Authoritative AI, built on decades of editorial integrity and expertise, not just algorithms.
Read more about our Authoritative AI.
[The author has used Microsoft Copilot to assist with research for this article. However, the article is the original work of the author.]
