Does the Privacy Act cover your organisation?
The OAIC says most small businesses are not covered by the Privacy Act, and defines a small business as one with an annual turnover of $3 million or less, counting income from all sources. Some businesses are covered regardless of turnover, including health service providers, businesses that trade in personal information and contractors providing services under a Commonwealth contract. If you are not covered, your client contracts may still require Privacy Act-level handling, so check those as well. This guide is administrative guidance for planning an LLM project. Confirm your own position using the OAIC's resources or a privacy adviser before relying on it.
Which principles apply when staff use an LLM?
The OAIC's guidance on commercially available AI products sets out how the existing principles apply. Privacy obligations apply to personal information input into an AI system and to output data generated by AI. Each principle below changes a specific design choice, from what goes into the index to how long conversation logs are kept. The OAIC also recommends, as best practice, that organisations do not enter personal information, and particularly sensitive information, into publicly available generative AI tools.
- APP 1: update your privacy policy and notifications with clear information about your use of AI.
- APP 3: generating or inferring personal information with AI is a collection and must comply with APP 3.
- APP 6: use or disclose personal information only for the primary purpose of collection unless an exception applies; the OAIC notes a secondary use may be acceptable if it was expressly outlined in a notice at collection and in your privacy policy.
- APP 10: take reasonable steps to ensure the accuracy of personal information you collect, generate, use and disclose with an AI product.
- APP 11: protect personal information from misuse and unauthorised access, and destroy or de-identify it once it is no longer needed.
Can you index documents that contain personal information?
A knowledge assistant over HR files, client correspondence or case notes is a new use of that information. Ask whether answering staff questions from those records fits the purpose the information was collected for. A narrower design often avoids the problem: index the procedure documents and leave the individual files out, or restrict a collection to the team that already handles those records. Apply your retention rules too. If a document should have been destroyed under your retention schedule, it should not survive inside a search index or vector store. A privacy impact assessment is a structured way to work through these questions while the design can still change.
When does APP 8 apply to an offshore AI service?
APP 8 covers disclosure of personal information to an overseas recipient. Where it applies, you must take reasonable steps to ensure the recipient does not breach the APPs, and under section 16C you can be accountable for the recipient's acts. The OAIC's guidelines note that giving information to an overseas cloud provider only for storage and access, under a binding contract that keeps it in your effective control, may be a use instead of a disclosure. Whether an offshore LLM service fits that description depends on its terms, including abuse-monitoring retention and human review. Get advice on your specific arrangement, or keep processing in Australia.
What changes on 10 December 2026?
The Privacy and Other Legislation Amendment Act 2024 added a transparency obligation to APP 1, starting on 10 December 2026. It applies where you have arranged for a computer program to make a decision, or do something substantially and directly related to making one, that could reasonably be expected to significantly affect an individual's rights or interests, and personal information is used in the program's operation. Your privacy policy must then describe the kinds of personal information used, the kinds of decisions made solely by the program, and the kinds of decisions where the program does something substantially and directly related to the decision. An LLM that screens job applicants or triages claims could fall within it.
The OAIC published new resources on this obligation on 30 September 2026. Read them before deciding whether an LLM workflow is in scope, and record the reasoning either way.
How do you respond if something goes wrong?
An LLM can expose personal information in new ways. A retrieval permission error might show one employee another person's HR record, or a prompt log containing customer details might be shared with a contractor who should not see it. Add these scenarios to your data breach response plan so the assessment starts quickly. The plan should name who can disable a source or the whole assistant, how you will work out which users saw which answers, and how long the relevant logs are kept. Without retrieval and access logs, you may not be able to tell who was affected.