DCS-2026-02 Use of Artificial Intelligence by NSW Government Agencies

The NSW Government already uses AI across areas such as environmental and asset monitoring, education services, and health. Emerging technologies, including generative AI, present further opportunities to improve service delivery and outcomes for the community. To realise these benefits, AI use in the NSW Government must be pursued safely, ethically and lawfully to maintain public trust.

The NSW Government has a structured, comprehensive approach to the design, development, procurement, implementation and use of AI within the public sector. The NSW framework for the responsible use of AI consists of the following:

• The AI Strategy sets the direction on the development and use of AI by NSW Government agencies.

• The NSW AI Operational Policy sets out the mandatory requirements that agencies must comply with, including Australia’s AI Ethics Principles.
• The AI Review Committee provides expert advice on AI use cases assessed as inherently high-risk or critical-risk.
• The NSW AI Assessment Framework (AIAF) provides NSW Government agencies with a step-by-step process for assessing the risks of AI projects and systems to help ensure AI is used safely, ethically and lawfully.

Compliance with the NSW AI Operational Policy is mandatory for all agencies using AI. Refer to the policy for further details on which entities are covered under the policy.

The NSW AI Strategy, NSW AI Operational Policy and AI Assessment Framework can be found at: Artificial Intelligence | Digital NSW

Your responsibilities

The aim of the NSW Government’s approach is to support agencies to innovate with AI technology; while making sure it is used safely, lawfully and ethically with clear accountability for the design and use of AI systems.

Agencies remain accountable and responsible for identifying, assessing, managing and monitoring AI use case risks.

Agencies are required to adhere to the following mandates in their design, development, procurement, implementation and use of AI systems:

1. NSW AI Operational Policy

The NSW AI Operational Policy sets out all-of-government requirements to support the safe, lawful and ethical use of AI within the NSW Government. It replaces the NSW AI Ethics Policy.

The Policy defines governance and assurance accountabilities and establishes mandatory rules for acceptable AI use that NSW Government agencies and employees must follow. It ensures that the use of AI systems meets the highest ethical and assurance standards and that proactive risk management strategies are in place.

The mandatory agency requirements are:

• adhere to Australia’s AI Ethics Principles when using, designing, developing, deploying and implementing AI systems. Agencies should use AI in ways that benefit individuals, society and the environment
• appoint an Accountable Official to oversee the policy’s implementation and act as a point of coordination with NSW GovAI within Digital NSW
• establish governance and assurance of AI, utilising existing functions where possible
• ensure that all AI use cases are registered in the AI Assessment Framework (AIAF) Platform and maintain accurate and complete records through the AI system lifecycle
• apply the AIAF to an AI use case where the registration process determines an assessment is required
• refer high-risk and critical-risk AI use cases to the AI Review Committee for advice on risk mitigation
• align agency ICT Acceptable Use policies to the acceptable use principles and practices in the Policy
• make AI literacy and policy training courses available to relevant employees using AI in their work.

Agencies are required to provide a signed annual attestation for the previous financial year to NSW GovAI by 31 October each year, with the first attestation due by 31 October 2027. This reporting timeframe provides agencies with at least 12 months to implement the policy following its release.

To support implementation, NSW GovAI is providing guidance material, rolling out AI literacy and policy training courses, and deploying the AIAF Platform.

During the transition to the AIAF Platform, agencies must continue to apply the existing AIAF Excel-based assessment process to all AI use cases until the platform is fully adopted.

2. Apply the AI Assessment Framework (AIAF) to AI use cases

Mandatory registration of AI use cases

All agencies are required to register AI use cases via the AIAF Platform as outlined in the NSW AI Operational Policy. This is the first step in the AIAF assessment process.

Registration of an AI use case is quick and simple. Based on the answers to the registration questions, the platform will determine whether the AIAF assessment needs to be completed.

Follow your agency internal policies and guidance to know who is responsible to register AI use cases and any related governance processes.

Apply the AIAF when required

The AIAF provides practical guidance for identifying and assessing risk related to designing, building, and using AI technology. The AIAF supports agencies in assessing risks, implementing mitigation strategies, and helps establish clear governance and accountability measures. The AIAF also requires agencies to detail how their projects align with Australia’s AI Ethics Principles.

The AIAF ensures NSW has a standard and consistent approach to AI risk levels and contemporary best practices to reduce the likelihood of harm.

Registration and completion of the AIAF in the Platform improves agency visibility of AI use and enables cross-government sharing, reuse of proven AI approaches, and all-of-government insights and reporting.

Agencies must continue to apply the existing AIAF Excel-based assessment process to all AI use cases until the platform is fully adopted.

Agencies must re-assess their AI use case throughout the AI system lifecycle, from inception to retirement, and whenever changes to risk, context or system functionality could affect outcomes or oversight. Agencies must conduct periodic reviews based on the potential risk of harm, as determined by the AIAF.

3. Higher risk projects must be submitted to the AI Review Committee

Agencies must refer critical and high-risk AI use cases to the NSW AI Review Committee. The committee, comprising academia, industry and NSW government experts from all relevant domains, will provide recommendations and advice to strengthen risk management of AI systems. NSW GovAI may also refer medium-risk AI use cases to the Committee where higher risk characteristics are present. 

Agencies can engage the AI Review Committee by emailing [email protected] within 5 business days of completing the AIAF.

Note:

Amendments were made to this circular to reflect the all-of-government NSW AI Operational Policy which replaces the NSW AI Ethics Policy, and deployment of the AI Assessment Framework Platform. No changes were made to the AI Strategy.