What Are Family Law Add-Backs?
In Australian family law, add-backs were once used to notionally reinsert funds or assets that had been prematurely spent, hidden, or wasted by one party into the matrimonial asset pool during property settlements. Courts applied this concept to maintain fairness in property settlements, particularly when misconduct or reckless behaviour impacted shared finances.
An add-back effectively treated the lost value as still existing, increasing the total asset pool in an effort to ensure an equitable division between parties.
However, recent significant legal developments have substantially altered this practice, effectively ending the traditional “add-back” approach.
The Traditional Role of Add-Backs in Property Settlements
Previously, Australian family law courts allowed the concept of add-backs under specific circumstances, such as:
- Premature distribution of joint funds or assets
- Unreasonable expenditure on legal fees
- Reckless spending or dissipation (e.g., gambling, extravagant purchases)
Common Types of Add-Backs (Pre-2025)
Legal Fees Paid from Joint Funds
Courts could notionally add back legal expenses paid from joint funds, particularly if one party benefited disproportionately.
Wasteful or Reckless Expenditures
Lavish spending, gambling, or unauthorised gifts were commonly treated as add-backs to restore balance.
Post-Separation Asset Dissipation
If one partner used assets irresponsibly after separation, the court could consider an add-back to account for the loss.
Notional Add-Backs
This covered missing or hidden assets—like cash withdrawals or undeclared earnings—that could not be traced but were presumed to exist.
The Legal Shift: Shinohara & Shinohara [2025]
In July 2025, the Full Court’s decision in Shinohara & Shinohara [2025] FedCFamC1A 126 has unequivocally ended the classical add-back doctrine.
This judgment aligned with reforms under the Family Law Amendment Act 2024, which specify that:
“Only current and existing legal and equitable interests may form part of the property settlement.”
The Full Court clearly indicated:
- Funds or assets no longer in existence cannot be notionally added back into the asset pool.
- Only current and existing legal and equitable interests may form part of the property settlement calculations.
Key Implications of the Shinohara Decision
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Courts can no longer notionally add-back funds or assets that no longer exist.
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Dissipated assets are addressed through equitable adjustments, not pool inflation.
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The asset pool must reflect only present and real property interests (assets and liabilities).
How Courts Handle Asset Dissipation Post-2025
The end of add-backs does not mean that courts will ignore reckless spending or deliberate depletion of assets. Instead, the focus has shifted to considerations under specific legislative sections, particularly:
Section 79(5)(d)
Allows courts to adjust property interests by considering intentional or reckless depletion of assets when distributing property.
Section 75(2)(o)
Permits broader equitable considerations, including one party’s past financial conduct, future needs, and contributions.
Therefore, rather than dollar-for-dollar adjustments, courts will now consider dissipation as part of the broader equitable assessment of each party’s future needs and contributions.
Practical Implications for Practitioners
Family lawyers and Family Dispute Resolution Practitioners must adjust their approach accordingly:
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Evidence Matters: Practitioners need to focus clients on gathering robust financial records to show intentional, reckless or wasteful spending by the other party.
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Shift the Narrative: Focus on how depletion affects the financial position and future needs, not simply on recovering amounts lost.
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Client Education: Set realistic expectations—dissipated funds no longer automatically increase the asset pool.
Role of Forensic Accountants in Post-2025 Disputes
Forensic accountants remain vital in identifying:
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Hidden income
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Business manipulation
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Unexplained withdrawals
Their findings support equitable claims under sections 79(5)(d) and 75(2)(o), though not for add-backs directly.
Case Studies: Before and After Shinohara
| Case | Add-Back Approach | Outcome |
|---|---|---|
| Case A (Pre-2025) | $20,000 gambling loss added back | Other party received larger asset share |
| Case B (Post-2025) | $30,000 holiday spending by one party | Court adjusted settlement under 75(2)(o) |
Misconceptions About Add-Backs in 2025
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❌ “Add-backs still exist.”
➤ No, they’ve been abolished. -
❌ “I can recover my ex’s legal fees via add-back.”
➤ Not anymore. Courts only consider how those fees impact equity. -
❌ “I’ll get compensated for every dollar they wasted.”
➤ Courts now focus on fair adjustments, not exact recovery.
Conclusion: A New Era for Property Settlements
The abolishment of add-backs marks a historic shift in Australian family law. Thanks to Shinohara & Shinohara and the Family Law Amendment Act 2024, courts must now focus solely on existing assets and apply equitable principles when dealing with misconduct.
For practitioners, the new standard demands:
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Clarity in financial information
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A shift from entitlement to fairness
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Strategic planning focused on sections 79 and 75
Clients must be advised early and clearly: it’s not about recovering every lost dollar—it’s about getting a fair and sustainable outcome based on the current circumstances.
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