Resources

  Introduction The division of property in Family Law settlements are often complicated and can take months, sometimes years, to resolve.  But what happens to the money spent before a property settlement is finalised? A recent judgement in the Federal Circuit and Family Court of Australia (“the Court”)  has marked the end of an era. Shinohara v Shinohara [2025] FedCFamC1A 126suggests that “add backs” are no longer possible, demonstrating a significant shift in property settlement disputes.   What are “Add Backs” in Family Law? Historically, addbacks in Family Law were used to allow parties to reintroduce funds or property that had already been spent/disposed of. These included:

• The use of joint money for legal fees;
• Withdrawals of large sums of cash;
• Gambling or wasting money; and
• Making other wanton or unreasonable purchases, which can otherwise be known as “wastage”.

In the past, the Court could treat these payments and funds as if they were still in the asset pool between spouses. This was referred to as a “notional add back”, and the person who did not spend the money could in-turn receive more from the final settlement. In accordance with the case of Omacini & Omacini (2005) FLC 93-218, the process of adding back funds was a discretionary exercise, and such discretion should be used to promote fairness. However, historically, add backs were applied inconsistently, and the case of Cerini & Cerini [1998] Fam CA 143 determined that their use should be the exception, rather than the rule.   The Shinohara case – What it means now? The case of Shinohara v Shinohara in July 2025, determined that the concept of add-backs were abolished, with reference to the Family Law Amendment Act 2024 (Cth). Specifically, section 79(3)(a)(i) delineates that “only existing property, rights, and liabilities at the time of trial are to be identified and divided.” Due to the amendments made by the Family Law Amendment Act, it is now no longer possible (or appropriate) to include property in the balance sheet that no longer exists in the hands of either party.   Future implications The key takeaway from Shinohara is that add backs are nowfar more difficult to include in property negotiations. This follows the commencement of the Family Law Amendment Act 2024, which expressly eradicates add backs. The dissipation of assets in family law, whether through legal fees or gambling, can no longer be “added back.”   Now, such funds must be considered under s 79(4) and s 79(5) of the Family Law Act. These two key provisions guide how the Court deals with dissipation of assets and overall fairness in property settlements.

• Section 79(4) Contributions in family law property settlements: The Court will look at what each spouse contributed financially and non-financially.
• Section 79(5) Needs and wastage in family law cases: The Court can make adjustments to achieve fairness, through looking at whether money was wasted or one spouse benefited more.

  An alternate reading of Shinohara An article “The Mischief Rule and Addbacks: A Critique of Shinohara” authored by the Honourable Michael Kent KC, Hon Garry Watts AM, Sydney Williams KC and Paul Doolan, provides a framework for understanding why Shinohara does not, and cannot, preclude addback altogether.   The mischief rule, originating in Heydon’s Case (1584) 76 ER 637 and consistently applied in Australian statutory construction, requires that a Court identify the “mischief” the legislation was designed to remedy and adopt the construction that suppresses that mischief. Applied to s 79 of the Family Law Act, the Article demonstrates that one of the mischiefs remedied by this section, is where one party by unilateral and self-serving conduct makes it more difficult for the other to receive a fair settlement. The article submits that reading Shinohara as a complete prohibition on addbacks, would produce outcomes that contradict the central requirement of s 79(2): that the finalOrders made are “just and equitable”.   Moving Forward Both the Family Law Amendment Act 2024 and the Shinohara case mark a significant shift in property law settlements. For separating couples, this means financial decisions post-separation carry more weight. It is crucial to maintain documentary evidence of contributions (including post separation)to ensure fairness isachieved.  It is important not to delay if you are concerned that matrimonial assets are at risk of being wasted/disposed of by the other party.   If you are navigating a Family Law property settlement, you should seek specialist Family Law advice.  The above is general information only, and should not be taken as advice applicable to your particular circumstances.