Tax file numbers and AI: what the TFN Rule requires.
Tax file numbers turn up all through an accounting practice’s files: returns, payment summaries, superannuation forms, onboarding documents. That makes them the information most likely to end up inside an AI tool by accident. The Privacy (Tax File Number) Rule 2015 is legally binding, it regulates the collection, storage, use, disclosure, security and disposal of TFN information, and a breach of it is an interference with privacy under the Privacy Act.
General information only. This guide summarises published professional standards and legislation and is not legal or professional advice. Read the primary sources linked throughout, and take advice on your firm’s specific position.
Who the Rule binds, and what it covers
The Rule binds TFN recipients, the people and organisations holding records that contain tax file number information, which in practice includes every tax practice. It applies only to the TFN information of individuals; it does not cover TFN information about companies, partnerships, superannuation funds or trusts. Those TFNs are still protected by the offence provisions below.
The rules an AI tool runs into
TFN information must only be used or disclosed for a purpose authorised by taxation law, personal assistance law or superannuation law. Sending it to an AI service has to fit inside that purpose.
TFN recipients must take reasonable steps to protect TFN information from misuse and loss, and from unauthorised access, use, modification or disclosure.
Access to records containing TFN information must be restricted to individuals who need to handle it for taxation law, personal assistance law or superannuation law purposes. An AI vendor’s staff and systems are hard to fit within that.
TFN information must be securely destroyed or permanently de-identified once it is no longer required by law or needed for an authorised purpose. If an AI service keeps copies, the firm needs to know how those will be destroyed.
The Rule also requires reasonable steps to ensure all staff are aware of the need to protect privacy when handling TFN information, and that staff who collect or access it understand the limits on its collection, use and disclosure. AI tools belong in that training.
The offence provisions
Separately from the Rule, sections 8WA and 8WB of the Taxation Administration Act 1953 create offences for unauthorised requests that a person quote their TFN, and for unauthorised recording, use or disclosure of a TFN, unless an exception applies. Penalties include imprisonment and fines, and unlike the Rule, the Act protects all TFNs, including those of businesses. That is why TFNs deserve a stricter line in a firm’s AI policy than the rest of a client file.
Practical options
The simplest rule to state and to follow: no TFN goes into any AI tool that sends data outside the practice.
If a document has to go into an external tool, remove TFNs first. This works for one document and fails at scale, because it depends on someone remembering every time.
AI that runs on hardware in the office keeps TFN information within the practice’s existing controls, so the access and disclosure questions stay where they already are.
Where deployment posture fits
TFNs are the clearest case for keeping AI processing inside the practice. Client files arrive with TFNs embedded in them, and no policy reliably catches every one. An on-premise unit for accounting practices processes those files on the firm’s own hardware, with access limited by the permissions the firm sets, so the Rule’s access and disclosure questions are handled within the controls the firm already applies to its file server. The security, training and destruction steps remain the firm’s to take.
Common questions
Can I put a client's tax file number into ChatGPT?
Does the TFN Rule cover business clients' TFNs?
What happens if TFN information is mishandled?
See Dominion answering from your own documents.
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