Empathetic AI secures $100,000 to help SMEs with taxes

Welcome back to a monthly special edition of Neural Notes where I speak to some of the most exciting AI startups in the country.

In this edition: the founder and CEO of Empathetic AI, Angela Shi, talks me through Luna – the company’s AI chatbot that aims to make tax time easier for SMEs.

Empathetic AI wants to tackle Australia’s complex tax system

Launched in 2023, Empathetic AI was one of three winners of Australia’s inaugural AI sprint last week, run by the National AI Centre (NAIC), Stone & Chalk and Google Cloud. It will receive $100,000 worth of support, which is great timing with Empathetic launching its Luna tax tool later this week.

Shi brings a wealth of experience from her previous roles as CFO within various tech companies. It was this experience and her deep understanding of the tax system that inspired the creation of Empathetic AI and Luna.

“Australia has one of the most complex tax systems in the world. The initial inspiration for creating Luna came from my own struggles with tax optimisation across different jurisdictions,” Shi said to SmartCompany.

According to Shi, having to do tax optimisation across different regions and jurisdictions was painful and time-consuming

“Every single time I reached out it took time for them to do the research, because Australia’s tax law is on a case law basis, which means that every single day new cases are coming up. So it’s super challenging for tax professionals to keep the knowledge up to date,” Shi said.

With many larger businesses utilising tools provided by the big four accounting firms, Luna is targeting Australian SMEs.

The chatbot is designed to provide scenario analysis, real-time ATO private ruling updates and automated legislation reference checks.

Luna aims to streamline tax processes, significantly reducing the time and costs associated with tax compliance.

“Luna can transform complex tax scenarios, which traditionally took weeks to analyse, into actionable insights in seconds. It’s a game-changer for tax professionals,” Shi said.

Users can sign up using their Google, LinkedIn or email accounts. Once logged in, they can start using Luna to ask tax-related questions.

The AI system provides answers, complete with references to relevant legislation and historical cases. For complex tax scenarios, Luna breaks down the analysis step-by-step, ensuring comprehensive and accurate advice.

A key feature of Luna is its ability to access real-time updates. According to Shi, the system continuously scans the ATO’s legal database, ensuring users have access to the latest case rulings and updates. Additionally, the feedback mechanism allows tax professionals to provide input.

“If a tax professional finds that Luna’s answer isn’t accurate, they can provide feedback, which our algorithms will use to improve future responses,” Shi said.

Luna also contains a privacy feature to remove personalised information.

“We understand that tax information is highly sensitive, that’s why we’ve built a desensitisation feature that automatically removes sensitive data from the system, ensuring client information remains secure,” Shi said.

This desensitisation feature not only maintains confidentiality but also builds a dictionary for users, allowing them to manage and redact sensitive information.

“All the sensitive information will be automatically removed by the system and will not go to the back end, ensuring privacy and security,” Shi said.

As Empathetic AI expands its product portfolio to include documentation drafting, this information will be automatically added back in the future for client-facing documents for speed and convenience. However, it will continue to not be stored on the back-end or used as part of data collection or model training.

Utilising AI Sprint funds for future developments

Winning $100,000 worth of support from the NAIC AI Sprint will enable Empathetic AI to enhance Luna’s capabilities and expand its reach. Shi outlined plans for the funds, focusing on product development, cloud computing resources and improving the accuracy of Luna’s outputs.

“We need computing power to train the data and keep improving the quality and accuracy of the answers,” Shi said.

Additionally, a portion of the funds will be allocated to marketing and commercialisation efforts to ensure Luna reaches its target audience of SMEs and second-tier accounting firms.

“We aim to target SMEs initially, as they often struggle with the complexities of tax compliance,” Shi said.

Empathetic AI has already seen interest from major tech companies who have been part of its pilot program. Although Luna is initially targeted at SMEs, it is considering plans to make it available to individual taxpayers in the future.

“Our long-term vision is to benefit the entire 20 million taxpayers in Australia,” Shi said.

The early feedback from early adopters has been positive.

“A lot of tax professionals, including tax partners from the Big Four, have called Luna a game-changer,” Shi said.

“What used to take weeks and cost thousands of dollars can now be done in seconds with Luna.”

Empathetic AI already has two other connected features in the works

While initially launching with the Luna chatbot this week, Empathetic AI plans to introduce two additional features in the future. The first, Doc Wise, will allow users to process various financial documents and provide instant insights. Shi said that it will be able to analyse trends in Excel spreadsheets or generate summaries from PDFs and Word documents.

The second, which was touched on earlier, is Drafty. This tool will help tax professionals draft tax advice documents, leveraging desensitisation to ensure privacy.

“Drafty will save tax professionals significant time by creating templates and automating the drafting process,” Shi said.

Empathetic AI is also planning to raise capital for a seed round later this year to support the growth and development of the business.

“Starting from the new financial year, after we launch, we’ll start raising capital. We do want to get some support from the government, but I’m also personally going to be looking for VCs from the second half of this year,” Shi said.

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