Prince Leonard created his principality in 1970 when he was tired of the Australian Government telling him how much wheat he could or could not grow on his own land. The short story is he created his own empire and therefore does not have to pay taxes to Oz.
He's 88 now and full of smarts so he seems to be able to talk his way into anything. He has a museum of artifacts and honours countries have bestowed on him, including a sword from King Carlos of Spain. There's also a post office with his own stamps and currency, a chapel, and a stone bust of Prince Leonard. He has 7 kids and 22 grandchildren so a well established lineage in place (unfortunately I couldn't talk my way into the inheritance).
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