How is property actually treated during a family law dispute? It’s a question many separating couples – and their advisers – grapple with, particularly when assets have already been spent, transferred, or no longer exist.
Under Australian family law, property settlements are not simply about what you once had – they are about what exists at the time of the Court’s assessment, and how each party’s contributions and circumstances should be weighed to achieve a just and equitable outcome.
A significant shift in this area has emerged following the Family Law Amendment Act 2024 (Cth). A key case from last year, Shinohara v Shinohara [2025], provides important guidance on how courts now approach assets that have been dissipated – and signals the end of the long-standing concept of “addbacks”.
If you are navigating separation, understanding how your asset pool is assessed is critical – particularly when working through a property settlement:
What are ‘addbacks’ in family law?
Historically, courts had the discretion to “add back” certain amounts to the property pool. This typically occurred where one party had:
- Spent money unreasonably (for example, excessive legal fees or gambling)
- Disposed of assets prior to trial
- Used joint funds for their sole benefit
Although those assets no longer existed, the Court could notionally include them in the balance sheet to ensure a fair division.
This approach was designed to prevent one party from unfairly reducing the asset pool before settlement.
What has changed under the new law?
The Family Law Amendment Act 2024 has fundamentally changed this position.
The legislation now makes it clear that:
- Only property that exists at the time of trial can be included in the asset pool
- Courts should not treat spent or disposed assets as if they still exist
- Instead, the way those assets were used must be considered when assessing contributions and overall fairness
This marks a clear departure from the traditional “addback” approach and requires a more nuanced assessment of financial conduct during the relationship and post-separation.
The case: Shinohara v Shinohara [2025]
What happened?
In Shinohara v Shinohara, the parties were married for approximately five years and accumulated a property pool of around $616,000 (excluding superannuation, which was dealt with separately).
The wife argued that she had made greater financial contributions, including:
- Bringing funds into the relationship
- Receiving an inheritance
A central issue in dispute was the treatment of proceeds from the sale of two investment properties, which had already been spent – primarily on legal fees.
The key legal question
Could those spent funds still be treated as part of the property pool?
Under the previous approach, they may have been “added back”. However, by the time the appeal was heard, the new legislative framework had come into effect.
What did the Court decide?
The Full Court found that the original trial judge had made several errors, including:
- Failing to give both parties a proper opportunity to address how the asset pool should be defined
- Not adequately explaining the reasoning behind the decision
- Overlooking relevant factual considerations
Importantly, the Full Court applied the new law, confirming that:
- Only existing property can form part of the balance sheet
- Spent funds cannot be “added back” as notional assets
Instead, the Court considered how those funds had been used when assessing contributions and determining a just and equitable outcome.
The outcome
After reassessing the matter, the Court determined that the wife had made greater contributions to the non-superannuation assets.
The final division was:
- Wife: 67.5%
- Husband: 32.5%
This outcome demonstrates that while spent assets are no longer added back, their use can still significantly influence the final distribution.
Why this matters for property settlements
This decision has practical implications for anyone involved in a family law property dispute.
The asset pool is now narrower
The Court will focus strictly on assets that exist at the time of trial. This means:
- Historical asset values are less relevant
- Dissipated property will not artificially inflate the pool
Financial conduct still matters
Even though addbacks are no longer used, the way assets are spent remains highly relevant. The Court may:
- Adjust contributions in favour of the other party
- Consider whether spending was reasonable or excessive
Timing is critical
Delays in resolving property matters may have real consequences. If assets are spent before trial:
- They may fall outside the pool entirely
- The outcome will depend on how the Court assesses that conduct
Early legal advice is essential
Understanding your position early is critical. If you are separating or have recently separated, seeking advice on divorce and separation can help you avoid costly mistakes:
Practical example
Consider a scenario where one party uses $100,000 from joint funds to pay legal fees before trial.
- Under the old approach, that amount may have been added back into the asset pool
- Under the new law, it will not be included
However, the Court may still:
- Examine whether the spending was reasonable
- Adjust the overall division to account for the impact on the other party
When should you seek legal advice?
You should seek advice early if:
- You are separating and there are significant assets involved
- Funds have already been spent or transferred
- There is disagreement about contributions or entitlements
- You are unsure how recent legal changes affect your position
Family law outcomes are highly fact-specific, and small decisions can have significant financial consequences. The earlier you understand your position, the more control you have over the outcome.
Take the next step
In some cases, parties may choose to formalise their agreement about property matters by entering into a Financial Agreement.
A Financial Agreement is essentially a contract between two parties made under the Family Law Act 1975 and requires both parties to obtain independent legal advice from an Australian lawyer. The law about Financial Agreements can be complex, so it is best to speak with a family lawyer to determine the best way to formalise your property agreement.
If parties cannot agree on the division of property
If you and your former partner cannot agree on property matters, you can apply to the Court for a property settlement. There are ongoing opportunities for you and your former partner to agree on a property settlement after filing an application. Most property settlement applications filed in Court are settled without the need to proceed to a Final Hearing and a decision being made by a Judge.
Get help from a family lawyer
Dividing up property after separation can be emotional and stressful, particularly when determining what happens to the family home or where complex financial structures are involved.
A family lawyer can guide you through a property settlement and ensure that your interests are protected. The team at RN LEGAL are here to help guide you through the process. If you or anyone you know requires assistance, please contact RN LEGAL on [02] 91 91 92 93 or [email protected].