Your client has been GST registered for over 15 years. She lodges every BAS. She claims ITCs every quarter. She rarely turns a profit. The ATO cancels her registration, claws back the credits, and imposes 50% penalties uplifted by 20%.
She argues her long registration history is inconsistent with recklessness. The Tribunal holds it cuts the other way.
Twilley and Commissioner of Taxation [2026] ARTA 562.
The Facts
Mrs Twilley claimed to trade as RKC Installations in construction [4]. From 2010 to 2019 her acquisitions exceeded sales by over $1.6M [33]. For the periods under review she returned $35,826 in GST and claimed $69,338 in ITCs [31].
Her husband held the QBCC licence. She did not know what a QBCC licence was [40]. The group's only website named another entity. She had never visited it [41]. Most purchase invoices went to other entities [47]. Retention of title clauses referred to RKC Poles Pty Ltd [48]. Three unsigned, backdated deeds of novation surfaced after ATO enquiries. Mrs Twilley did not know they existed [50, 51].
What the Tribunal Held
Senior Member Olding affirmed every decision.
Under s 9-20(2)(c) of the GST Act, an activity by an individual without a reasonable expectation of profit is not an enterprise. Fifteen years of losses, vague evidence of funding from loans and credit cards [34], and no basis to expect the pattern would change were fatal [35, 37].
No enterprise meant no registration under s 23-10, no ABN under s 8(1)(a) of the ABN Act, and no ITCs or FTCs under s 11-5(d) of the GST Act and s 41-5(2) of the Fuel Tax Act.
The burden under s 14ZZK of the TAA was not discharged [60]. Informality in small business was acknowledged but did not excuse the absence of general ledgers or evidence Mrs Twilley was the decision-maker [58].
On penalties, the Tribunal applied the BRK (Bris) test: gross indifference to whether the statement is correct [64]. Mrs Twilley relied on her husband and an unqualified adviser. She did not properly check the statements [66]. The 50% base rate for recklessness stood, with the 20% uplift under s 284-220(1)(c) of Schedule 1 to the TAA [62].
Practitioner Takeaway
Read paragraph [70] carefully. Mrs Twilley argued longstanding registration was inconsistent with recklessness. The Tribunal held it cut the other way. A long-term registrant is expected to know the basics and cannot abdicate responsibility to an unqualified person.
If your client is an individual carrying on an activity without a reasonable expectation of profit, s 9-20(2)(c) means they are not carrying on an enterprise. No enterprise means no registration, no ABN, and every ITC claimed is a shortfall.
When did you last stress-test whether your sole trader clients are carrying on an enterprise?
General information only. This note was written as at 16 April 2026 and the law may have changed since. It is not legal or tax advice, does not take account of your circumstances, and must not be relied upon as a substitute for advice on your own matter.