PIA or AI Impact Assessment: Which One Do You Need in Australia?

As more organisations introduce AI into products, services, and internal operations, one practical question comes up quickly: do we need a privacy impact assessment, an AI impact assessment, or both?

In Australia, the answer depends on the use case. But one point is already clear from official guidance: these are not the same exercise, and they should not be treated as interchangeable.¹ ²

A privacy impact assessment is designed to identify and manage privacy impacts. An AI impact assessment is designed to identify and manage a broader set of AI-related impacts and risks. Some initiatives may require one. Others may require both.¹ ² ³

Quick answer

• Use a PIA when the key question is how a project affects personal information and privacy risk.¹
• Use an AI impact assessment when the use case relies materially on AI and raises broader AI governance, accountability, transparency, or risk questions.² ³
• Use both when the initiative is AI-enabled and involves meaningful privacy implications.¹ ² ⁴

What a PIA is for

The OAIC describes a privacy impact assessment as a systematic assessment of a project that identifies potential privacy impacts and recommendations to manage, minimise, or eliminate them.¹

The OAIC recommends that organisations conduct PIAs as part of risk management and planning processes.¹ ⁵ A PIA is therefore the right starting point when a project involves personal information and there is a need to assess how privacy will be affected.

What an AI impact assessment is for

The Digital Transformation Agency’s AI impact assessment tool is designed for Australian Government teams working on an AI use case. Digital.gov.au says the tool helps teams identify, assess, and manage AI use case impacts and risks against Australia’s AI Ethics Principles.²

The supporting guidance explains that the tool is intended to complement and strengthen existing frameworks and practices rather than duplicate them.³

That is an important point. An AI impact assessment is not a replacement for privacy review. It is a structured process for looking at a wider range of issues that can arise from an AI use case, including governance, accountability, transparency, contestability, security, legal considerations, and broader risk.³

Side-by-side comparison

Why they are not interchangeable

A PIA and an AI impact assessment may overlap, but they are aimed at different questions.

A PIA asks questions such as:

• what personal information is involved
• how that information will be collected, used, disclosed, stored, or retained
• what privacy risks arise for individuals
• what changes are needed to reduce those risks.¹

An AI impact assessment asks broader questions, such as:

• what the AI use case is intended to do
• what risks arise from the use of AI in that context
• how decisions, oversight, accountability, and transparency will work
• whether additional controls or approvals are required
• whether the use case should proceed as designed.³

Treating one as a substitute for the other usually results in blind spots.

Some AI projects still clearly need a PIA

The existence of an AI use case does not reduce the need for privacy review where personal information is involved.

The OAIC’s AI guidance makes clear that privacy law continues to apply to AI products and systems. The OAIC has also warned, as a matter of best practice, against entering personal information, particularly sensitive information, into publicly available generative AI tools because of the significant and complex privacy risks involved.⁴ ⁶

This means many AI-related projects still need a privacy assessment. If an organisation is using personal information in an AI-enabled workflow, making AI-assisted decisions about individuals, or sending data to an AI product, privacy questions remain front and centre.⁴ ⁶

The DTA guidance explicitly points back to privacy assessment

One of the most useful parts of the AI impact assessment guidance is that it does not pretend AI governance exists in a silo.

The supporting guidance states that the AI impact assessment tool complements existing frameworks and should not be treated as duplicating them.³ The privacy protection and security guidance also directs agencies to consider privacy analysis early in the process.⁷

The implication is practical and important: AI assessment and privacy assessment should often work together.

When a PIA may be enough

A PIA may be enough where:

• the project is not materially dependent on AI
• the main risk profile is privacy-related
• the system does not create broader AI governance concerns beyond ordinary privacy, security, and project controls.¹

When an AI impact assessment is more likely to be needed

An AI impact assessment is more likely to be needed where:

• the use case relies materially on AI capabilities
• the output may influence significant decisions or services
• transparency, explainability, oversight, or contestability matter
• there are broader governance and accountability questions beyond privacy alone
• the use case may fall into a higher-risk category.² ³

In the DTA model, threshold assessment is used to identify whether the use case stays low risk or needs further scrutiny. If one or more risks are medium or higher, the guidance says the officer must complete a full assessment, amend the use case to reduce risk, or decide not to proceed.⁸

When both are likely to be appropriate

Both are likely to be needed where:

• personal information is central to the AI use case
• the AI system influences decisions with material effects on people
• the use case creates both privacy risk and broader governance risk
• multiple internal stakeholders need to review or approve the initiative.¹ ³ ⁴

This is increasingly common. In many real projects, privacy and AI governance are not separate workstreams. They are connected parts of the same operational review.

Decision guide

Conclusion

In Australia, PIAs and AI impact assessments serve different purposes.

A PIA remains the key tool for identifying and managing privacy impacts. An AI impact assessment addresses a broader set of AI-related risks and governance questions. Some initiatives will require only one. Many higher-risk or more complex initiatives will need both.¹ ² ³

The organisations that handle this best will not treat privacy and AI review as isolated documents. They will treat them as connected parts of a more operational governance model.

References

1. OAIC, Guide to undertaking privacy impact assessments.
2. Digital Transformation Agency, AI impact assessment tool.
3. Digital Transformation Agency, AI impact assessment tool guidance.
4. OAIC, Guidance on privacy and the use of commercially available AI products.
5. OAIC, 10 steps to undertaking a privacy impact assessment.
6. OAIC, Guidance on privacy and developing and training generative AI models.
7. Digital Transformation Agency, Privacy protection and security guidance.
8. Digital Transformation Agency, Threshold assessment outcomes guidance.