Background
Earl Howard Larmar and E H Larmar Services Pty Ltd, as trustee of the Larmar Family Trust No 2, brought related tax appeals concerning alternative amended assessments on income from property syndicates. The Commissioner had assessed the same income alternatively to Mr Larmar and to the trust company, so only one set of assessments could represent the true position.
In the substantive judgment, Larmar v Commissioner of Taxation [2026] FCA 826, the Court held that Mr Larmar had not shown that the assessments issued to him were excessive. His personal appeal was dismissed. The trust’s alternative assessments were consequently excessive, and its appeal succeeded. The parties then disputed costs, including whether either side was entitled to indemnity costs based on settlement offers.
The Court’s Holding
Wheatley J ordered the applicants to pay 85% of the Commissioner’s costs of both appeals, assessed together as a lump sum by a Registrar. Although the Commissioner succeeded on his primary position in Mr Larmar’s appeal, he could not also succeed on the alternative assessments against the trust. The Commissioner’s overall success therefore justified costs, but with a modest 15% reduction.
The Court rejected both claims for indemnity costs. The trust’s offer under rule 25.14 was contingent on a related offer in Mr Larmar’s proceeding and, viewed across the intertwined appeals, would have put the Commissioner in a less favourable overall position. That rebutted the usual rule-based costs consequence. The Commissioner’s Calderbank offer, made effectively one business day before trial and open for less than 24 hours, was not unreasonably rejected.
Key Takeaways
- Where alternative tax assessments are litigated together, costs may be determined across the proceedings rather than separately.
- A party that succeeds overall but not completely may receive a reduced proportion of its costs through a broad-brush assessment.
- Settlement-offer consequences depend on the offer’s practical operation, timing, clarity, and the position of the litigation as a whole.
Why It Matters
The decision illustrates the Federal Court’s preference for practical, consolidated costs orders in closely connected tax appeals. It avoids artificial allocation between proceedings that shared evidence, representation, submissions, and a factual foundation.
It also confirms that formal offer rules do not operate mechanically where linked offers produce an anomalous overall result, and that a late Calderbank offer with a very short acceptance period will not readily justify indemnity costs.