A recent decision of the Administrative Review Tribunal (ART) serves as an important reminder for taxpayers and advisers about the risks of relying on unverified, AI-generated legal material in tax disputes.
The Tribunal made it clear that while artificial intelligence can be a useful research aid, uncritical reliance on it can seriously undermine a case.
The decision, handed down on 12 January, involved a self-represented taxpayer who was disputing the ATO’s position on whether his French Bulldog breeding activities constituted an “enterprise” for GST purposes under the A New Tax System (Goods and Services Tax) Act 1999. Although the Tribunal ultimately accepted some aspects of the taxpayer’s substantive argument, it was highly critical of his approach to legal research, which significantly weakened his overall case.
A major concern for the Tribunal was that several of the cases relied upon by the taxpayer could not be found in any recognised law report or legal database. In one instance, the taxpayer cited a case that was entirely fabricated and did not exist at all. While the name of the cited decision was similar to a real case, the genuine case dealt with a completely different issue and offered no support for the taxpayer’s argument.
Even where real cases were cited, the Tribunal found that many were misunderstood, misapplied, or irrelevant to the issues being determined. This included reliance on immigration law decisions that had no connection to the GST and tax law questions before the Tribunal.
The Tribunal noted that this pattern of errors was consistent with the uncritical use of artificial intelligence as a legal research tool. The Tribunal Member emphasised that if AI is used, every case it identifies must be independently verified, located on a public legal database, and read in full to confirm it actually supports the proposition being advanced. Failing to take these steps wastes the Tribunal’s limited time and resources, particularly when it is forced to search for cases that do not exist or assess authorities that have no relevance to the dispute.
While the taxpayer did succeed on some key points, the poor quality of his legal authorities damaged his credibility. As a result, large portions of his GST input tax credit claims were rejected and findings of recklessness were upheld.
The clear takeaway from this decision is that AI tools can be a helpful starting point, but they are no substitute for proper legal research and professional judgement. For taxpayers and advisers involved in disputes with the ATO, accuracy, verification, and expert advice remain critical to achieving a favourable outcome.