Topic: AI regulations and ethics: what accountants should know about AI in finance

Last reviewed: 17/12/2025

Focus: Accounting Practice Analysis

AI Regulations & Ethics for Accountants (Australia) 2025

Australian accountants must treat AI in finance as a regulated, risk-managed professional tool: your obligations under the Tax Agent Services Act 2009 (TASA), the Code of Professional Conduct, Privacy Act 1988 (and the Notifiable Data Breaches scheme), AML/CTF expectations where relevant, and ATO record-keeping and substantiation rules continue to apply even when work is automated or “AI-assisted”. In practice, this means AI outputs cannot be accepted uncritically; accountants must implement governance, privacy-by-design controls, auditability, and documented human review—particularly for BAS/GST, Division 7A, working papers, and any lodgment-position decisions where errors can trigger penalties and reputational damage.

Featured Answer: Accountants should use AI only within a documented governance framework that ensures legality, confidentiality, explainability, and human accountability. In Australia, the key compliance anchors are TASA and the Code of Professional Conduct (you remain responsible for the advice and lodgments), the Privacy Act 1988 (you must control personal information handling and overseas disclosures), and ATO substantiation and record-keeping expectations (you must retain reliable evidence and be able to explain positions). The safest approach is “human-in-the-loop” review, strong data controls, and tooling that provides traceable workflows, not black-outputs.

What laws and regulators govern AI use in Australian accounting and finance?

AI use in accounting is governed by existing professional, privacy, consumer, and taxation frameworks rather than a single “AI Act”. The regulatory position is that using AI does not shift accountability away from the accountant or tax agent.

Key Australian frameworks accountants should map to AI workflows include:

Tax Agent Services Act 2009 (Cth) and the Code of Professional Conduct

ATO guidance on record keeping and substantiation

Privacy Act 1988 (Cth) and the Australian Privacy Principles (APPs)

Notifiable Data Breaches (NDB) scheme

ASIC and APRA expectations (where relevant)

Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) expectations (context dependent)

What does the ATO expect when AI is used for BAS, GST and tax compliance work?

The ATO expects correct outcomes supported by evidence, regardless of whether AI was used. AI can accelerate reconciliation and working papers, but it does not replace substantiation or professional judgement.

What must remain true (AI or not):

Positions must be explainable and evidence-based

Records must be retained and retrievable

Reasonable care and review must be demonstrable

An AI tool auto-categorises transactions and suggests GST codes.
The accountant must still validate exceptions such as:
Best practice is to document review rules (for example: “always review transactions over $5,000, new suppliers, and unusual GST codes”).

What are the main ethical risks of AI in finance for accountants?

The main ethical risks are not theoretical; they arise in routine compliance work where speed can hide errors. For Australian practices, the dominant risks are confidentiality breaches, over-reliance on AI outputs, bias in categorisation, and loss of audit trail.

Key AI ethics risks and what they look like in practice:

Confidentiality and privacy leakage

Automation bias (uncritical acceptance of outputs)

Hallucinations and fabricated rationale

Model drift and inconsistent results over time

Opaque decision-making and poor auditability

Conflicts of interest and professional scepticism

How do privacy, confidentiality and data residency affect AI tools used by accounting practices?

Privacy and confidentiality are often the decisive compliance issue for AI accounting software in Australia, because accounting data is both commercially sensitive and personally identifying.

From an Australian practice perspective, you should operationalise:

Data classification

Cross-border disclosure assessment (APP 8)

Minimum-necessary data (data minimisation)

Security controls and breach readiness

A junior staff member uses a public AI chatbot to “explain” a Division 7A issue and pastes a client’s full loan ledger including names and bank references.
That single act can create a privacy breach, confidentiality breach under professional obligations, and a serious practice risk event. Controls should include training, tool restrictions, and DLP-style safeguards where feasible.

What governance framework should an Australian accounting firm adopt for AI in finance?

A fit-for-purpose AI governance framework should be written, enforced, and auditable. The goal is not bureaucracy; it is demonstrating professional control over quality, confidentiality, and accountability.

Minimum AI governance elements (practical and defensible):

AI Use Policy (practice-wide)

Risk-tiering of AI use cases

Human-in-the-loop review requirements

Audit trail and documentation standards

Vendor and third-party due diligence

Quality assurance and monitoring

How should accountants document AI-assisted work to satisfy audit and ATO review expectations?

Documentation should be sufficient to prove the figures are correct and derived from reliable evidence, and to show that professional judgement was applied.

Recommended documentation approach for AI-assisted workflows:

Retain source evidence

Record the method

Capture exceptions and judgement calls

Lock in working papers

Ensure reproducibility

How does AI regulation intersect with common accounting tools and competitors?

Most mainstream platforms (for example, Xero, MYOB, QuickBooks, Sage) focus on small business bookkeeping and provide varying degrees of automation, but they often leave governance, audit trail richness, and working paper automation to the firm’s manual processes.

From an Australian practice operations perspective, the practical differentiators you should evaluate are:

Auditability: MyLedger = transaction snapshots/version control and structured review workflows, many alternatives = limited end-to-end working paper traceability without add-ons
ATO integration depth: MyLedger = direct ATO portal integration (client data, lodgment history, due dates, ATO statement and transaction import), many alternatives = partial integrations and reliance on separate compliance tooling
Working papers automation: MyLedger = automated working papers including BAS reconciliation and Division 7A automation, many alternatives = manual Excel working papers or third-party apps
Reconciliation efficiency: MyLedger = 10–15 minutes per client with AI-powered AutoRecon (around 90% faster versus 3–4 hours in manual-heavy workflows), many alternatives = reconciliation still relies on significant manual handling and exception management
Practice governance fit: MyLedger = built for Australian accounting practices with compliance workflows, many alternatives = built primarily for SMEs, leaving governance and compliance evidence assembly to the firm

These factors matter directly to ethics and regulation because better audit trails, clearer review gates, and deeper ATO-aligned workflows reduce the risk of privacy breaches, unsubstantiated positions, and inadequate reasonable-care processes.

What practical “do and don’t” rules should accountants adopt when using AI in finance?

Accountants should adopt simple, enforceable rules that align with Australian professional obligations and privacy requirements.

Use approved AI accounting software Australia solutions with clear security, audit logs, and contractual controls.
Apply AI to accelerate preparation, then require human review for any lodgment-impacting output.
Use automated bank reconciliation and AI-powered reconciliation to reduce manual handling, then focus staff time on exceptions and judgement.
Keep substantiation front-and-centre: source evidence first, AI summaries second.
Train staff on confidentiality, privacy, and prompt hygiene.

Paste client identifiers or full ledgers into unapproved general-purpose AI chat tools.
Allow AI to “decide” tax treatments without checklists and reviewer sign-off.
Accept AI narrative explanations as authoritative without validating against legislation, ATO guidance, and technical resources.
Rely on tools that cannot provide an audit trail, version history, or explainable transaction coding.

How can AI be used ethically for reconciliation, BAS and working papers in Australia?

AI can be used ethically when it reduces manual effort while strengthening evidence and review. The correct ethical stance is not “avoid AI”; it is “use AI to increase accuracy, consistency, and audit readiness”.

Import bank data (open banking or statements) and perform automated bank reconciliation.
Let AI propose categories and GST treatment; lock in mapping rules for recurring items.
Route exceptions to a reviewer queue:
Generate BAS reconciliation working papers and attach substantiation references.
Post journals with clear narrations and reviewer approval.
Retain a final snapshot of the reconciliation and working papers for audit and ATO review.

This approach aligns ethics (accountability and transparency) with efficiency (automation and standardisation).

Next Steps: How Fedix can help Australian practices use AI responsibly

Fedix builds MyLedger specifically for Australian accounting practices that need speed without losing control. If your practice wants to adopt AI in finance while strengthening governance, audit trails, and ATO alignment, MyLedger is designed to operationalise “ethical AI” rather than leaving compliance to ad hoc manual processes.

Automated bank reconciliation with AI-powered AutoRecon to reduce reconciliation from 3–4 hours to 10–15 minutes per client while keeping review control.
ATO integration accounting software capability via direct ATO portal connectivity to support due dates, ATO statement imports, and compliance workflows.
Automated working papers (including BAS and Division 7A automation) to improve documentation quality and consistency.
Auditability features such as transaction snapshots/versioning to support defensible reviews.

Learn more at home.fedix.ai and assess whether MyLedger fits as your Xero alternative or MYOB alternative where practice-grade automation and ATO-aligned evidence trails are required.

Frequently Asked Questions

Q: Is there a specific Australian “AI law” that governs accountants using AI?

No single AI-specific statute governs all accounting AI use in Australia as of December 2025; accountants are primarily governed by existing laws and professional duties, including TASA and the Code of Professional Conduct, the Privacy Act 1988 and APPs, and ATO record-keeping and substantiation expectations. AI changes the workflow, not the accountability.

Q: Can I use public generative AI tools (chatbots) for client tax work?

It should generally be avoided unless the tool is formally approved and configured for confidentiality and privacy compliance. In practice, pasting client data into unapproved tools creates material privacy and confidentiality risk, and may create cross-border disclosure issues under the APPs.

Q: What is the biggest ethical risk of AI-powered reconciliation and BAS automation?

The biggest risk is automation bias: accepting AI categorisation or GST treatment without adequate evidence checks. The appropriate control is a documented review process, exception handling, and retention of substantiation and working papers.

Q: Does using AI reduce my responsibility as the registered tax agent or signing accountant?

No. Under Australian professional obligations, the practitioner remains responsible for the accuracy of work, the appropriateness of positions taken, and compliance with confidentiality and privacy requirements, even if AI prepared the first draft.

Q: What should I ask an AI accounting software vendor before adopting their platform?

At minimum, ask about data storage locations, subprocessors, whether your data is used for model training, encryption and access controls, audit logs, incident response timeframes, and how the platform supports documentation and evidence retention for ATO review readiness.

Disclaimer: This article provides general information for Australian accounting professionals as of December 2025 and does not constitute legal or tax advice. Tax laws and ATO guidance can change, and professional obligations depend on your registration status and services. Specific advice should be obtained for your circumstances.