Wealthy accountant loses bid to reclassify income from property syndicates

The Federal Court of Australia has dismissed a taxation appeal brought by Earl Howard Larmar, a qualified accountant of 61 years' standing, who said 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 both have since argued that the assessments were excessive or otherwise incorrect.

Larmar and E H Larmar Services submitted that they have each properly returned the correct amount of property syndicate income, and the syndicate’s fees are 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 that Larmar had been establishing property syndicates for over three decades and had developed extensive expertise in commercial property development.

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 that it was his intention that the company would employ all of his accounting firm’s staff, and the company would act as the “service entity” to provide management and administration to the firm.

Staff engaged in the firm's work prepared drafts of the annual financial statements and partnership tax returns for each syndicate, which 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 co-ordinating and overseeing it, including planning, reporting, organising, leading, and controlling.

While Larmar took charge of the management of the syndicates, including their finances, the court was not satisfied, as it supported the submission that the company 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 that the management fees were the Services.

Larmar generally regarded the brokerage fees as his own, and it was he who decided what would happen to those fees.

In most cases, brokerage fees were reinvested in the particular syndicate and in Larmar’s personal investment in it, thereby increasing Larmar’s personal wealth and benefiting the property syndicate's 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 one reason why Larmar did not discharge his onus of proving the fees were properly the income of the services.

Larmar also failed to discharge his onus regarding 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 that there was an evasion.

In submitting, the commissioner applied the wrong test; Larmar and E H Larmar Services submitted that 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 that Larmar engaged in evasion.

As such, the commissioner could amend the assessments at any time.

Citation: Larmar v Commissioner of Taxation [2026] FCA 826.