He told the bank the fees were his personal assets. He told the ATO they belonged to the trust. The Court noticed.
Your client runs property syndicates through a service entity. The fees are returned as the entity’s income. But to support a personal guarantee, your client listed those same fees with the bank as personal assets.
Two different stories. Same money. The Court noticed. Larmar v Commissioner of Taxation [2026] FCA 826.
What happened
First, the basics. Income is assessed to the person who derives it: s 6-5 ITAA97. Whose it is turns on substance, not labels: who earns it and who controls it.
Mr Larmar was a chartered accountant and tax agent who ran 12 property syndicates over 30 years, charging management, brokerage, success and consultancy fees. He said the fees belonged to his service entity, trustee of his family trust. From 2005 to 2015 his net wealth grew from about $11m to about $75m, driven mainly by the syndicates and their fees [202].
The Commissioner assessed the fees to him personally per the evasion opinion, some $28m under-reported against some $2.3m returned [266].
The bank document trap
For the guarantees, he gave ING Direct his personal asset position. The bank’s records listed “management fees due” of $1.41m and “fees due” of $16.23m (including a $15m success fee) as his personal assets [127], [131].
Wheatley J reasoned: either those records were accurate, or he gave the bank false information. Neither party submitted that. So the records stood and the fees were his [129], [132].
It got worse. He set the success fee himself: $30m in total seemed “an appropriate and fair amount”, $15m of it his [164]. Management fees were always banked into his firm’s account, not the entity’s [144]. Every week funds flowed on to his personal account for living expenses, “drawings”, not returned as income [170]. No agency agreement, no separate letterhead, no fee disclosure to investors. He chose every property, every investor, every fee, every dividend. His own words: “conducting the orchestra” [155].
The fallback failed too: the fees were personal services income (s 84-5), the entity failed all four personal services business tests, so Division 86 would catch them anyway [229], [234]-[251]. The evasion opinion stood: 2017 amendments reaching back to 2005 were valid. Appeal dismissed [279]-[283].
The practical takeaway
First, what your client tells the bank matters for tax. A statement of personal assets behind a guarantee is evidence of whose income it is.
Second, a service entity only works if the commercial reality matches: separate bank accounts, written agreements, real disclosure. Paper the arrangement or lose it.
Third, where one individual is the whole show, only a personal services business escapes attribution.
General information only. This note was accurate when written. The law may have changed since and the note is not updated. 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. If the issue is live for you or your client, email arda@nortonquaytaxlaw.com.au for advice on the current position.