Not into a free or personal account. The privacy regulator's best-practice advice is to keep personal information, and especially sensitive information, out of publicly available generative AI tools. A business-grade tool can be workable if it is under a proper contract, does not train on your data, is used for the purpose you collected the information for, and your clients have been told. And fewer small businesses are exempt from the Privacy Act than most owners think.
Does the Privacy Act apply to my business?
The Privacy Act exempts most businesses with an annual turnover of $3 million or less, counting income from all sources, according to the OAIC's small business guidance.
But some businesses are covered regardless of turnover, including:
- health service providers (which the OAIC says includes allied health, complementary therapists, child care centres and private schools)
- businesses that trade in personal information
- contractors providing services under a Commonwealth contract
- businesses related to a business the Privacy Act covers
- reporting entities under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006
That last one now matters far more. From 1 July 2026, AML/CTF obligations extend to what the OAIC calls "tranche 2" entities: real estate professionals, dealers in precious stones and metals, and professional service providers such as lawyers, conveyancers, accountants and trust and company service providers. The OAIC's guidance for reporting entities says small businesses that are reporting entities must comply with the Privacy Act for personal information handled in connection with their AML/CTF obligations, though not for their other activities unless another item on the list applies.
So a three-person accounting practice or a suburban real estate agency may now be inside the Act for at least part of its client files.
What applies no matter how small I am?
Even if you are genuinely exempt, some rules still reach you.
Tax file numbers. The Privacy (Tax File Number) Rule 2015 regulates the collection, storage, use, disclosure, security and disposal of individuals' TFN information. The OAIC lists it as one of the reasons a small business can have privacy obligations. A TFN has no business being in a public chatbot.
The statutory tort. Since 10 June 2025, individuals can sue for serious invasions of privacy, including misuse of information about them. The OAIC says the tort is broader than the Privacy Act and extends to people and entities that may not be covered by the Australian Privacy Principles.
Your professional regulator. Tax and BAS agents now have TPB(GS) 55/2026, issued 22 July 2026, which says practitioners need each client's permission before disclosing their information to a third party, which can include entering it into AI tools. More in our post on the TPB's AI guidance. For financial services and credit licensees, ASIC's Report 798 reviewed 23 licensees and, ASIC said, found nearly half had no policies considering consumer fairness or bias, and even fewer had policies on disclosing AI use to consumers.
What does the OAIC say about using AI tools?
The OAIC's guidance on privacy and commercially available AI products (updated 17 January 2025) sets out what the regulator expects:
- Inputs and outputs both count. Privacy obligations apply to personal information you type in, and to anything the AI produces that contains personal information, including content that is inferred or simply wrong.
- Purpose (APP 6). You can generally only use or disclose personal information for the purpose you collected it for, unless you have consent or the client would reasonably expect the new use. The OAIC says that for AI-related secondary uses such as training a system, this will often be hard to establish.
- Overseas (APP 8). If the tool runs in the cloud, consider where the servers are and whether information could be disclosed outside Australia.
- Security (APP 11). Make sure the tool does not expose the information you hold to new security risks.
- Transparency. Update your privacy policy and notices with clear information about how you use AI.
And the line most people need to hear: "As a matter of best practice, the OAIC recommends that organisations do not enter personal information, and particularly sensitive information, into publicly available generative AI tools."
Is a business account different from a free account?
Often, yes, but only if you check. The OAIC warns that some commercial AI products have terms or settings that let the provider collect what customers type for further training, and that some features, such as a link to a search engine, can pass prompts to a third party. A business plan is a contract you can read. A personal account on a staff member's phone is not.
Before anyone puts client information into a tool, get written answers to five questions:
- Does the provider train on what we type? Check that it is off by default on your plan, not just a toggle each user has to find.
- Is there a business contract or data processing terms? And does any feature (web search, plugins, connectors) send our data to someone else?
- Where is the data stored and processed? If it leaves Australia, you need to deal with APP 8.
- How long is it kept, and who controls it? Can an administrator see usage, set retention and delete data when a staff member leaves?
- Can we stop staff using personal accounts for work? If not, your policy is the only control, and the OAIC says prohibitions need training and auditing behind them.
If a tool can't answer these clearly, it is not the right tool for client data. Use it for work that contains no personal information.
What changes on 10 December 2026?
From 10 December 2026, businesses covered by the Australian Privacy Principles must say in their privacy policy when a computer program uses personal information to make, or substantially help make, decisions that could reasonably be expected to significantly affect someone's rights or interests. The policy has to describe the kinds of personal information and decisions involved. The OAIC published a fact sheet, flowchart and updated APP 1 guidelines on 30 September 2026.
Drafting an email with AI is unlikely to be that kind of decision. Using AI to approve, decline, rank or price clients might be. If you are unsure, the OAIC flowchart is the place to start.
Why would my clients care?
Because they have told the regulator they do. The OAIC's 2026 community attitudes survey of 1,504 adults found:
- 71 per cent are uncomfortable with organisations using personal information provided for a service to train AI systems after the service is complete
- 96 per cent say some conditions should be in place before AI is used in decisions that may affect them
- trust in AI companies sits at 4 per cent
The OAIC received 1,205 data breach notifications in 2025, the highest since the scheme began, with 81 from legal, accounting and management services.
Businesses are moving faster on use than on rules. The National AI Centre's SME tracking found 43 per cent of Australian SMEs reported some AI adoption over December 2025 to February 2026, and that transparency with customers about AI use lags well behind internal checks. A Hays survey found 60 per cent of respondents use AI regularly at work, and 78 per cent have had no formal training from their employer.
What should I do this week?
- Ask your team what they already use. Assume someone is using a personal account. You want to know, not to punish.
- Work out whether the Privacy Act covers you, using the list above and the OAIC's small business checklist. If you are joining the AML/CTF regime, assume it does for those files.
- Pick one business-grade tool and run the five questions. Turn off training and any web or plugin features you don't need.
- Write a one-page AI policy. The National AI Centre has a free AI policy guide and template that covers what AI can be used for, who approves higher-risk uses and what data staff can put into tools.
- Update your privacy policy and client terms to say you use AI, for what, and where data is stored.
- Put a person between the AI and the client. Nothing AI-drafted goes out without someone reading it.
If you want a second opinion on any of this, it is the first thing we do in an AI consulting engagement, and sometimes the answer is that a well-configured off-the-shelf tool is all you need.
When is a chat window the wrong tool?
When the same task with client data happens every day. Copying records into a chat window and back is where mistakes happen, and it leaves no record of who saw what.
The alternative is AI built into a system you control. The client data stays in your system, access is limited to the people who need it, and the AI works on the record in place. For example, we built a CRM for a financial services practice where AI drafts documents from the client record and an adviser checks every draft before it goes out. The data we host for clients is stored and processed in Australia and is never used to train models. More on that in why AI is not a chatbot.
Frequently asked questions
Is it illegal to put client information into ChatGPT in Australia? Not automatically. It depends on whether the Privacy Act or another rule applies to you, which account you use, and what you told clients. The OAIC's best-practice advice is not to put personal information into publicly available generative AI tools at all.
Is a paid business AI account safe for client data? A business plan can be, if the contract says your data isn't used for training, you know where it is stored, and you can control access and retention. Check the terms for your specific plan rather than assuming.
Do I need to tell clients I use AI? The OAIC says businesses should update privacy policies and notices with clear information about their AI use. From 10 December 2026, covered businesses must also disclose certain automated decisions in their privacy policy.
Can I de-identify information first? Removing names, TFNs, addresses and account numbers lowers the risk a lot and is a good habit. Be careful with small details that still identify someone, such as a rare job title in a small town.
If you'd like to talk through how your business uses AI with client data, book a free 30-minute chat at /book.
This article is general information, not legal advice.