Sharesight warns investors against AI tax calculations

Sharesight has warned investors against using generic artificial intelligence tools to calculate investment taxes, echoing Australian Taxation Office advice to taxpayers this filing season.

The portfolio tracking and tax reporting company said general-purpose AI systems are particularly unreliable for investment tax reporting, where outcomes depend on transaction-level records and current Australian tax rules. Mistakes can change taxable gains, income treatment and offsets.

Doug Morris, Chief Executive Officer at Sharesight, said he had seen more investors trying to use broad AI tools to work out their tax positions, but those attempts often fail to reflect the complexity of Australian investment tax rules.

"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," Morris said.

The ATO has said taxpayers remain responsible for mistakes in their returns even when those errors come from chatbot-generated advice. That matters for investors because tax reporting on shares and funds often requires detailed treatment of trading history, reinvestments and corporate changes.

Common errors

Among the issues Sharesight highlighted were capital gains tax calculation methods, including whether holdings are assessed on a first-in, first-out basis, by minimum gain, or by specific parcel identification. Choosing the wrong method can materially change the final tax bill.

Another recurring problem involves the 12-month capital gains tax discount. AI tools can misread holding periods when investors have built positions over time or acquired additional shares through dividend reinvestment plans.

Corporate actions add another layer of difficulty. Stock splits, mergers, demergers and capital returns can all require cost base adjustments, and those adjustments do not follow a single standard approach in every case.

Sharesight also pointed to mistakes involving franking credits and dividend reinvestment plans. Some AI-generated responses treat reinvested shares as if they were acquired for nothing, rather than recognising the taxable dividend event and assigning a new cost base to the new parcel.

Foreign income creates further risk. Broad AI models can apply tax treatment from the United States, the United Kingdom or other jurisdictions to Australian investments, or fail to identify a foreign income tax offset that may be available.

For self-managed super funds, the problems can be more pronounced. AI tools may apply standard individual tax rules to SMSF holdings despite differences in rates, exemptions and pension-phase treatment.

Outdated inputs

Another weakness is the risk that AI tools rely on outdated thresholds, rates or legislative settings. Because tax law changes over time, a model trained on older material may produce figures that no longer match the current financial year.

Sharesight also raised concerns about data handling. Users who enter account numbers, portfolio holdings or income details into a general-purpose AI tool may not have a clear picture of how that information is stored or used.

Support for caution over AI-generated tax material has also emerged in a recent tribunal matter. In Smith and Commissioner of Taxation [2026] ARTA 25, the Administrative Review Tribunal criticised a taxpayer who had relied on unverified AI-generated legal authorities after some of the cited cases were fabricated or irrelevant.

Morris said AI still has a role in helping people understand tax language and concepts, but not in producing the final numbers for a return. He drew a distinction between educational use and formal tax calculation.

"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," Morris said.