Reading a history book doesn't make you a lawyer.
Calling this a "hack" is silly.
If I said I'd defeated Microsoft by discovering a backdoor into MULTICS I'd be correctly laughed off HN. The claim above is analogous.
The PHR doesn't pay taxes to the ATO; that seems like quite an achievement for a micronation. I think it genuinely qualifies as more than just "a bit of showmanship".
I'd like to believe that the reason they're left alone is not just because of the legal hassle, but because someone in the Australian government had a sense of humour.
I can't find a source for this other than claims made by the promoters. The ATO clearly consider Hutt River to be a scam.
Sending income tax returns of the form "I earned $0" doesn't mean you've "won". It just means you've committed a Commonwealth crime by lying on your tax form.
Plus they pay GST anyhow.
On the other hand, it really does seem like the government are happy to leave them alone as long as people don't try to "take the piss" and turn it into wide-scale tax avoidance scheme.
Plus it's passed into folk legend. It'd be bad politics to stamp on it. I imagine that they're waiting for the owners to die or sell up and they'll collect their pound of flesh from the estate.