Does the Court Take Into Account ‘Add-Backs’ in a Property Settlement?

Shinohara & Shinohara: A Fundamental Case For Family Law – No More Add-backs

When separating couples divide their property, the law requires careful assessment of contributions. Furthermore, it demands a process that is fair and transparent. The recent Full Court decision of Shinohara & Shinohara [2025] FedCFamC1A 126 fundamentally changes how courts decide property settlements. The court confirmed that the long-standing practice of notionally ‘adding back’ spent funds into the property pool no longer applies after recent legislative amendments.

At Rowan Skinner & Associates Lawyers, we understand the importance of staying on top of these decisions. Therefore, we aim to provide our clients with transparent advice. Do you face a situation where your former partner has wasted money on gambling or risky share trading?

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What are ‘add-backs’?

‘Add-backs’ are funds that once existed but were spent before trial, for example on legal fees or gambling. Historically, courts could still include these funds notionally in the property pool if it seemed just and equitable. However, this may now change after the Shinohara decision.

The 2025 Legislative Amendments

On 10 June 2025, amendments to s 79 of the Family Law Act 1975 took effect. The section now instructs the Court to determine only the “existing legal and equitable rights and interests” in property at the time of trial. This change narrows the property pool to what exists physically and legally at that point.

Before these amendments, courts could adopt a mathematical approach to integrate dissipated property as if it still existed. Therefore, practitioners now need to identify alternative ways to adjust for inequities.

Background of the Case

The Shinohara appeal arose from a dispute between separating parties who sold several properties during separation:

• The husband’s Suburb EE unit
• The wife’s Suburb FF unit
• Their joint Suburb BB home

The parties spent most proceeds from these sales on legal fees and living expenses, so very little remained by the time the property pool was calculated. Both parties agreed to notionally ‘add back’ these spent funds. However, the trial judge disagreed and failed to inform the parties of this decision.

This decision had a significant impact. The ‘add-backs’ totalled $592,768, almost matching the total pool considered by the primary judge ($616,330). Consequently, the depleted funds represented nearly 50% of the total asset pool.

Grounds of Appeal

Both parties appealed the decision. The father argued that the 2025 amendments codified existing principles on notional add-backs, but the Full Court promptly dismissed his submissions. Meanwhile, the mother appealed on different grounds. She accepted that adding notional property to the balance sheet conflicts with s 79(3), yet she claimed that the judge’s decision caused procedural unfairness.

Full Court Response

The Full Court allowed the mother’s appeal, explaining at [104]:

“It could not have been reasonably anticipated by the parties … that the primary judge would not include the adding back of the notional items of property that no longer existed. To do so fails to afford them, and specifically the mother who appeared without legal representation … procedural fairness to make submissions on how those items would be taken into account.”

The Court emphasised the error was serious because it affected almost 50% of the property pool. Furthermore, the mother, unrepresented during final submissions, lacked the opportunity to address the judge directly.

Further Grounds of Appeal

The mother also challenged other aspects of the trial judge’s decision:

• The judge ignored her father’s $400,000 gift for the family home.
• Her financial contributions, including $40,000 to mortgage offset accounts, were overlooked.
• Her homemaking and parenting contributions were not recognised.
• The judge ignored the income disparity between the parties.

The Full Court strongly criticised the trial judge. It highlighted that the mother’s non-financial contributions and primary parenting role were disregarded. The Court noted her post-separation parenting and mortgage payments. Moreover, it pointed out that the judge misrepresented the father as the effective carer from July 2020, even though the second child was not yet born.

Legal Implications

Section 79 now requires courts to consider categories previously notionally added back to ensure a just outcome. This consideration includes historical contributions and their impact on current and future circumstances (s 79(5)). The holistic approach in assessing contributions (as seen in Jabour & Jabour 2019 and Horrigan & Horrigan 2020) remains critical. Courts must weigh the disposal of property, its achieved value, and its application to achieve justice and equity.

The Outcome: A Rebalanced Split

• The mother received 67.5% of the non-superannuation pool ($416,281).
• The father received 32.5% ($200,219).
• Superannuation interests remained as agreed at trial.

What This Means for You

The Full Court definitively rejected the practice of adding notional property to the balance sheet. While the mother’s appeal succeeded, the Court focused on s 79(5) factors and contributions during the relationship. Consequently, evidence of dissipated assets remains critical and is now considered within a contributions and needs assessment framework.

Accurate record keeping is now more important than ever. Parties must maintain detailed records to support their position, as dissipated funds cannot be simply added back to the balance sheet.

The Shinohara decision ends the ‘add-backs’ era, creating a new landscape where courts only consider existing property. Dissipated assets are assessed in the context of contributions and future needs.

How We Can Help

At Rowan Skinner & Associates Lawyers, we understand the stress and complexity of property settlements, especially involving significant assets. If you face challenges, call our team at (03) 9995 9155 for a non-obligation discussion. We serve clients across Melbourne, including Northcote, Alphington, Carlton, Fitzroy, North Fitzroy, Kew, Heidelberg, South Melbourne, and South Yarra.

Case: Shinohara & Shinohara [2025] FedCFamC1A 126