The Australian Taxation Office has launched a tender for an AI coding assistant tools to support more than 800 developers, requiring all data processing to remain onshore and comply with stringent cybersecurity frameworks.

The three-year contract, with options for two additional one-year extensions, mandates the solution be hosted within Australia and prohibits offshore storage of large language models, according to tender documents.

The procurement follows growing government adoption of AI tools while addressing national security concerns about data sovereignty. The ATO specification requires compliance with Australian Signals Directorate cyber standards and the Protective Security Policy Framework.

"The solution must have guardrails that protect the ATO's reputation by reducing the risk of harmful material being input or output from foundation models," the tender states, requiring evidence of controls within large language model curation processes.

The procurement targets seamless integration with existing development environments including Visual Studio 2019, 2022, and Visual Studio Code, plus Azure DevOps Services Git repositories. The solution must support real-time, high-volume simultaneous usage across the ATO's complex multi-technology application stack.

Mandatory requirements include software-as-a-service delivery, encryption of data at rest and in transit, and capabilities for translating legacy code bases to modern languages. The system must also generate test scenarios and provide natural language-to-code conversion.

The tender emphasises minimal deployment complexity and comprehensive training transfer to ATO personnel. Successful providers must demonstrate adequate onshore resources and provide four-hour response times for support tickets.

Security requirements extend beyond data location to include depersonalisation capabilities for test environments and explicit guarantees that code prompts will not be retained for model training purposes.

The contract value was not disclosed in available tender documentation.