Shinohara: The End of Add-Backs in Family Law Property Settlements
On 10 June 2025, the amendments to section 79 of the Family Law Act 1975 came into effect. Now, the Court must only determine the “existing legal and equitable rights and interests” in property at the time of trial. The amendments narrow the asset pool to what currently exists at the time of the trial.
Prior to the amendments, the Court was permitted to include categories of “add-backs” to be included in the balance sheet. This allowed dissipated property to be treated as though it was still in existence, altering the overall division of the asset pool between the parties.
On 23 July 2025, the Full Court handed down a landmark decision that changes the way property settlements are determined under the Family Law Act 1975 post June 2025 amendments. In Shinohara & Shinohara [2025] FedCFamC1A 126 (“Shinohara”), the Court confirmed that the long-standing practice of “add backs” was no longer taken into consideration.
What are add-backs?
The concept of "add-backs" allowed the Court to account for assets that were no longer in existence by "adding back" the funds into the asset pool.
There were three distinct categories of add-backs, which were outlined in the Full Court case of Omacini & Omacini (2005) FLC 93-218, which were as follows:
Legal fees paid from joint or individual assets;
Wastage: reckless, negligent, or wanton dissipation; and
Premature distribution of matrimonial property.
In other words, “add-backs” allowed the Court to account for assets that would have ordinarily comprised part of the asset pool however are no longer in existence.
Facts of Shinohara
The parties’ marriage was reasonably short, lasting 5 years and the asset pool was modest. Over the course of the parties’ separation, they had sold properties owned jointly and in their sole names. The proceeds of sale from these properties were used to pay legal fees and other expenses, which the parties had agreed to record as “add-backs” on the balance sheet. The parties agreed to “add-backs” totaling around $592,768.
The primary judge at trial did not include the notional “add-backs” in the asset pool. The property available for division was limited to assets that existed at the time of the trial, which was approximately $589,155. This essentially ‘halved’ the asset pool available for distribution.
The Full Court allowed the appeal, making the finding that the trial judge had failed to address the parties’ mutual assumption about “add-backs”, which resulted in procedural unfairness.
The Full Court recalculated the parties’ contributions and needs without placing the notional amounts into the asset pool. Instead, it assessed the use of the dissipated assets under s79(4) which relates to contributions and s79(5) which relates to future needs. This approach complied with the new legislative requirements while still recognising the impact of the parties’ prior dealings with property.
Significance of Shinohara
The Full Court made several important rulings in Shinohara:
“Add-backs” are no longer included in the Balance Sheet: The pool of assets can only include current legal and equitable interests that exist at the time of trial.
Dissipated or spent assets cannot be divided: If money has been used or assets sold, they cannot be “added back.”
Wastage or dissipation is still relevant: The Court can consider how assets were used, but the value of the assets will not be included in the pool if spent.
It is important that separated parties keep a record of all asset sales and expenditure to support their position should they need to engage in the family law process or approach the Court for a property settlement. Parties should prepare and maintain detailed evidence on:
Circumstances of the disposal of an asset;
Whether the disposal was agreed to between the parties or disposed of unilaterally;
The use of the proceeds and whether this was agreed to by both parties; and
Any impact on the size and composition of the pool.
Conclusion
The Shinohara decision and the 2025 amendments to the Family law Act 1975 have profoundly changed property settlement proceedings. More information on the 2025 amendments can be found here.
If you require advice on how these changes could affect your matter, please contact Dorter Family Lawyers and Mediators on (02) 9929 8840 or send an enquiry here.
