The Federal Court of Australia has dismissed a taxation appeal brought by Earl Howard Larmar, a qualified accountant of 61-years standing who argued fees derived from his management of 12 properties were not ordinary or personal services income.
Between 2005 and 2014, Larmar received just shy of $30 million in additional income, attributed to property management fees, success fees, brokerage fees, and project management consultancy fees.
A similar appeal was brought by E H Larmar Services Pty Ltd, trustee for the Larmar Family Trust No 2 (LFT2), for income derived in 2024. Larmar was the Services’ sole director and shareholder.
Following a 2017 audit, the Commissioner of Taxation issued notes of amended assessments to Larmar and Services, and the latter two have since argued it was excessive or otherwise incorrect.
Larmar and the Services submitted they have each properly returned the correct amount of property syndicate income, and the syndicate’s fees is not to be brought to account in the hands of Larmar. That is, such amounts are not ordinary or personal services income.
The court heard Larmar had been conducting and establishing property syndicates for over three decades, and had developed extensive expertise in the development of commercial property.
As a result of his “own effort, hard work, skill and expertise”, Larmar’s wealth grew from $11 to $75 million between 2005 and 2015.
He gave evidence it was his intention the Services would employ all of his accounting firm’s staff, and Services would act as the “service entity” to provide management and administration to the firm.
Staff engaged in the work of the firm prepared drafts of the annual financial statements and partnership tax returns for each syndicate, and these were then personally reviewed and approved by Larmar.
Larmar made the final decisions on finance and management, such as when and how much dividends should be paid, and when or whether an investor could redeem their investment.
He likened his position to that of “conducting the orchestra”.
Management fees were charged to the syndicate for the process of coordinating and overseeing them, including planning, reporting, organising, leading and controlling the particular syndicate.
While Larmar took charge of the management of the syndicates, including its finances, the court was not satisfied it supported the submission that Services was providing management services.
Further, Larmar made representations to banks that the management fees were his own personal funds. The court said this did not support a finding the management fees were the Services.
Larmar generally regarded the brokerage fees as his personally, and it was he who decided what was to happen with those fees.
In most cases, brokerage fees were reinvested into the particular syndicate and Larmar’s personal investment in it, which would have the effect of increasing Larmar’s own personal wealth and would be beneficial to the property syndicates ongoing success.
Every week, regular deposits were made from the firm’s bank account to Larmar’s own bank account for his and his family’s living expenses. The court heard these were described as “drawings”.
However, the court said there was no reconciliation of the drawings compared to the income returned to the property syndicate fees. It was a one reason why Larmar did not discharge his onus or proving the fees were properly the income of the Services.
Larmar also failed to discharge his onus with respect to the success fees and the property management consultancy fees.
A final issue was whether the commissioner had the power to amend the assessments by forming the opinion there was an evasion.
In submitting the commissioner applied the wrong test, Larmar and Services submitted the test was not a “blameworthy act”.
“A blameworthy act of itself, it is submitted, means no more than doing something wrong, which would not fall within the ambit of evasion. There has to be, in the applicants’ submission, something more in respect of the conduct of the taxpayer, it is not sufficient to omit income,” the Federal Court noted.
However, the court found the commissioner applied the correct test and actually formed the requisite opinion Larmar engaged in evasion.
As such, the commissioner was able to amend the assessments at any time.
Citation: Lamar v Commissioner of Taxation [2026] FCA 826.
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