Artificial Intelligence (AI) is no longer a futuristic concept. It is rapidly transforming how businesses operate in Australia and globally.

It has become an integral part of many business models, including automating customer service and improving inventory management.

According to the CSIRO, 60 per cent of Australian businesses are using or planning to use AI, yet very few have assessed the legal risks involved.

If your business is using AI or plans to use it, there are several legal considerations you cannot afford to ignore.

This article explores the key legal implications of using AI in your business, including how it affects intellectual property, workplace ethics, and data obligations.

The legal risks of using AI in your business

AI is already changing how businesses across Australia make decisions, engage with customers, and manage operations.

A logistics company may use AI to optimise delivery routes.

A professional services firm might automate document processing with natural language tools.

Even small businesses are using AI to streamline recruitment or monitor inventory.

But with these new capabilities come legal obligations. Unlike off-the-shelf software, AI tools raise complex questions about data ownership, accountability, and regulatory compliance.

If you’re adopting AI tools to drive business efficiency, it is critical to understand your legal position and obligations. This is where experienced commercial lawyers can help you identify risk, draft appropriate contracts, and put the right legal frameworks in place.

How does AI affect intellectual property?

The impact on intellectual property is one of the most pressing legal questions facing Australian business owners using AI today.

For example, if the AI platform you use generates client-facing information, product designs, or data insights, who owns the result? You? The AI developer? The software provider?

Under Australian law, intellectual property rights typically belong to the person or entity that created the work. However, when content is generated by an AI tool, there may be no explicit legal author.

If you’re using AI tools that create or manipulate intellectual property, it’s essential to have agreements in place that clearly allocate rights, ownership, and licensing terms. This protects your assets and avoids disputes down the line.

City Pacific Lawyers can assist in reviewing or drafting these terms, ensuring they align with your business interests and Australian intellectual property law.

What are AI ethics in the workplace?

Using AI in hiring, performance management, or even surveillance raises several ethical and legal concerns. AI tools used for these purposes can unintentionally discriminate against certain groups if they are built on biased data.

For example, if your business uses AI to scan CVs, the tool might prioritise applicants based on patterns found in previous hires, potentially disadvantaging qualified candidates from different backgrounds.

Workplace discrimination and bias are regulated under Australian law. If AI is used in a way that results in unlawful discrimination, your business may be held liable, regardless of whether the bias was intentional.

This makes it essential to assess any AI tools used in employment decisions for bias, fairness and transparency. Regular reviews, clear policies, and informed consent from employees are also essential for managing workplace risk.

Understanding the legal implications of AI in Australian workplaces

Australia does not yet have a single piece of legislation dedicated to AI. Instead, AI is regulated through existing legal frameworks, including privacy, anti-discrimination, consumer protection and intellectual property law.

This means businesses using AI must ensure their systems comply with a patchwork of existing laws. For example:

  • AI tools handling personal information must comply with the Privacy Act 1988 (Cth), including obligations around data collection, use and disclosure. It is important to understand how the AI tool uses information that may be considered personal. If you are not certain, avoid disclosing personal information to an AI tool.
  • If AI is used in advertising or customer service, the business must ensure its claims are accurate and not misleading under Australian Consumer Law.
  • Decisions made using AI must be explainable and transparent, especially where the outcome significantly impacts an individual.

Legal compliance is not just about avoiding fines or lawsuits. It is also about maintaining trust with your customers, staff, and stakeholders.

City Pacific Lawyers can help you understand your obligations and implement safeguards for responsible AI use.

Why a legal strategy matters when integrating AI into your operations

It is easy to focus on what AI can do for your business. However, just as important is how you manage the risks.

If you are a business owner in Melbourne or across Victoria using AI, it pays to engage a commercial lawyer who understands both the technology and the law. Legal advice should cover more than just contracts. It should help you think through accountability, risk allocation, licensing, insurance, and compliance.

Some key questions to ask include:

  • Who is responsible if the AI makes a mistake?
  • Have I protected my business’s intellectual property rights in AI-generated work?
  • Does my data collection comply with privacy laws?
  • Are there adequate terms in place with software vendors or AI developers?
  • Do my staff know how to use AI ethically and lawfully?

Without a clear legal framework, businesses can expose themselves to reputational damage, data breaches or costly disputes.

Working with Melbourne commercial lawyers who understand AI

As AI tools become more embedded in business operations, so too do the legal risks. At City Pacific Lawyers, we work with business owners across Melbourne and Victoria to help them stay compliant, minimise risk, and protect their commercial interests.

Whether you’re just starting to use AI in your business or already rely on it day-to-day, our commercial lawyers can provide the practical, strategic legal advice you need.

We offer a full range of legal services for businesses, including contract drafting, compliance reviews, risk management frameworks, IP advice and more. Our team understands both the opportunities and the legal realities of artificial intelligence in Australian workplaces.

Get legal support before AI becomes a problem

AI is moving fast, and regulation is catching up. Don’t wait for legal issues to arise. If your business is already using AI or plans to, now is the time to put the right legal structures in place.

City Pacific Lawyers can help you future-proof your business by ensuring your AI use is legally sound, ethically responsible, and commercially protected.

Contact our team of commercial law specialists at (03) 9592 3356 or visit citypacific.com.au to book a consultation.