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 not only careful assessment of contributions but also a process that is fair and transparent. The recent Full Court decision of Shinohara & Shinohara [2025] FedCFamC1A 126 has fundamentally changed the way that property settlements are to be decided, with the court confirming that the long-standing practice of notionally ‘adding back’ funds which have already been spent into the property pool no longer applies following recent legislative amendments.

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

Rowan Skinner is a highly experienced property dispute lawyer and accredited family law specialist. Consult with Rowan Skinner for expert family law legal advice and to seek help in navigating your family law and property disputes.

What are ‘add-backs’?

For context, ‘add-backs’ are funds that once existed but were spent before trial (on legal fees or wasted on things like gambling or risky share trading). Historically, this has meant they can still be notionally included in the property pool if the court finds it just and equitable to do so. However, this may change after this critical decision.

The 2025 legislative amendments

On 10 June 2025, amendments to s 79 of the Family Law Act 1975 came into effect. The section now expressly requires the Court to determine only the “existing legal and equitable rights and interests” in property at the time of trial.

This new language is crucial, as it narrows the scope of the property pool to what physically and legally exists at that point in time.

As above, prior to these amendments, Courts were permitted to adopt a mathematical approach to consider how to integrate dissipated property into the balance sheet as if it still existed. However, a question does remain as to how practitioners might seek adjustments for inequities.

What is the background of the case?

The Shinohara appeal arose out of the dispute between separating parties who had sold several properties during the course of their separation. These were:

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

The proceeds from the sales of these properties were largely spent on legal fees and living expenses and thus had vanished by the time the property pool was being added up at trial.

This is where the issue arose.

Whilst both parties involved agreed that these spent funds should be notionally ‘added back’ to the property pool for the purposes of division, the trial judge disagreed and chose not to do so – without informing the parties of this decision.

This had a huge impact, as the ‘add-backs’ represented a total sum of $592,768, compared with the total pool that the primary judge considered, which was in the amount of $616,330.

This means that the depleted funds represented close to 50% of the total asset pool.

What were the grounds of appeal?

Both parties unsurprisingly appealed against this decision.

The father appealed on the grounds that the 2025 amendments to s 79 simply codified existing principle as to the notional adding back of property that no longer exists. His submissions were grounded in the court’s reasoning in Omacini and were promptly dismissed by the Full Court here.

On the other hand, the mother appealed on different grounds. Whilst she accepted that adding notional property back to the balance sheet is counterintuitive to s 79(3), she claimed that her submissions proceeded on the grounds that this would be the case, and so that the primary judge’s decision not to include it caused her procedural unfairness.

How did the Full Court respond?

The Full Court allowed the mother’s appeal on these grounds, 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.”

This was a serious error, especially because the difference was almost 50% of the property pool. As the Full Court noted, “[t]here was a considerable disconnect between the way the trial proceeded and how the primary judge resolved it” [85].

The mother had been unrepresented when delivering final submissions, and the Full Court highlighted that this made the lack of clarity particularly serious.

“[S]he ought to have been given the opportunity to address the primary judge on whether that was an appropriate course for him to take” [97].

Failing to do so amounted to a denial of procedural fairness.

Further grounds of appeal

The mother also appealed against the property orders made by the trial judge on multiple other grounds. She argued that:

• The judge had failed to properly account for her father’s $400,000 gift toward the purchase of the family home.
• Her greater financial contributions, including payments of $40,000 into mortgage offset accounts, were overlooked.
• Her homemaking and parenting contributions during the children’s early years were not recognised.
• The judge failed to consider the income disparity between the parties.

On these points, the Full Court was highly critical of the reasoning at first instance.

The Full Court also found at [106] that the trial judge failed to properly consider the mother’s homemaking role:

“There is no reference in the reasons to the mother’s non-financial, homemaking or parenting contributions. It is uncontroversial that the mother remained at home after the birth of the children while the father attended work.”

The Court noted that the judge’s finding that the father had been the “effective carer of the children since July 2020” was “contrary to compelling inferences” [106] given that the couple’s second child was not even born at that date.

The mother had been the primary homemaker and parent throughout the relationship, particularly before 2020. Yet the trial judge said there was “no basis upon which to consider that either party’s contributions… were greater than the other” [112].

The Full Court disagreed, noting that “the mother’s post-separation parenting contributions outweighed those of the father” [113]. Even more strikingly, they pointed out that while the mother continued to pay the mortgage after separation (while also caring for the children), the judge did not seem to account for this properly in the final split.

In addition, the Court accepted that the mother’s earning capacity had been affected by her time out of the workforce during the children’s infancy and her subsequent mental health challenges.

So that it is clear, s 79 now directs that the categories identified in Omacini pre-amendment that were notionally added back are to be considered in ensuring a just and equitable outcome, either by way of historical contributions, or by way of their relationship to and impact upon the current and future circumstances at the s 79(5) stage. For the avoidance of doubt, it is open when consideration is given to s 79(2) of the Act, to consider the matters in s 79(3)(a) and s 79(3)(b), together with those in s 79(4) and s 79(5) and conclude it is not just and equitable to make any order (Cosola & Moretto (2023) FLC 94-143).

The holistic approach in assessing and determining contributions and adjustments thereto (Jabour & Jabour (2019) FLC 93-898; Horrigan & Horrigan [2020] FamCAFC 25) remains applicable. Each of the considerations, by either s 79(4) or s 79(5), requires engagement with the circumstances of the disposal of property, the value it achieved, and its use and application being considered and weighed to achieve the mandate of justice and equity that permeates s 79 of the Act.

The Outcome: A Rebalanced Split

After finding that the original decision didn’t reflect the justice of the case, the Full Court re-exercised the discretion to divide property:

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

What this means for you

The critical idea to take from this case is that the Full Court has definitively rejected the practice of adding notional property to the balance sheet, as it does not exist and thus cannot be identified.

Whilst they allowed the mother’s appeal, their re-exercise of discretion focused on s 79(5) factors (eg, future financial needs), as well as the parties’ contributions during the relationship, embracing a holistic approach which moves beyond the mathematics of add-backs.

This means that for future cases, evidence of how assets were dissipated is paramount. These assets are still considered by the court, but through a contributions and needs assessment.

It also means that record keeping is more critical than ever, as parties will need detailed records to support their position in Court, no longer able to simply add the dissipated funds back onto the balance sheet.

The Shinohara decision marks the end of the ‘add-backs’ era, and ushers in a new landscape where Courts are restricted to considering existing property, and dissipated assets are considered within the framework of contributions and needs.

How we can help

At Rowan Skinner & Associates Lawyers, we understand how stressful and complicated property settlements can be, especially when family relationships and significant assets are involved.

If you are struggling with your current situation, call our team at (03) 9995 9155 for a non-obligation discussion.  We service clients in Melbourne, Melbourne Northern Suburbs, such as Northcote, Alphington, Carlton, Fitzroy, North Fitzroy, Kew and Heidelberg, as well as South Melbourne and South Yarra.

Case: Shinohara & Shinohara [2025] FedCFamC1A 126