The Death of Add Backs? Understanding Shinohara [2025] FedCFamC1A 126 and the Future of Notional Property in Family Law
The recent Full Court decision in Shinohara [2025] FedCFamC1A 126 has reshaped the way family lawyers must approach the concept of “add backs” in property settlements. For decades, the practice of notionally “adding back” funds that had been spent on legal fees, living expenses, or other purposes was used to achieve a fair outcome between parties. However, Shinohara marks a decisive turn, confirming that notional property simply cannot be included in the balance sheet for division.
What Are Add Backs?
Traditionally, “add backs” were a judicial mechanism used to treat certain funds that no longer existed as if they still formed part of the matrimonial asset pool. For example, if one party had withdrawn and spent joint savings, in specific circumstances, the court could notionally “add back” those funds to that party’s side of the ledger, effectively treating them as though they still existed. The goal was to ensure fairness and to prevent one party from benefiting from the dissipation of assets.
Earlier authorities such as Omacini & Omacini [2005] FamCAFC 104 recognised three main categories of add backs:
- Funds used for legal fees
- Premature distributions or dispositions of assets
- Wastage or reckless expenditure
These categories operated as an exception to the general rule that only existing property could be divided.
The Shift After Stanford and Bevan
The High Court in Stanford v Stanford [2012] HCA 52 emphasised that the court’s power under section 79 of the Family Law Act 1975 (Cth) requires identification and adjustment of existing legal and equitable interests in property. Following Stanford, the Full Court in Bevan & Bevan [2013] FamCAFC 116 again challenged whether it was appropriate to include property that no longer existed in the balance sheet.
Despite these developments, the practice of add backs continued in many cases, often justified as necessary to achieve justice and equity. Shinohara however, makes clear that add backs are no longer proper practice.
The Decision in Shinohara
In Shinohara, both parties agreed that certain funds (sale proceeds from properties) had been spent, largely on legal fees. At trial, the primary judge declined to add those funds back into the asset pool, instead dividing the remaining sale proceeds equally. On appeal, the Full Court confirmed that this approach was correct in law.
The Court held that section 79(3) (section 90SM(3) for de facto cases) now requires the identification and adjustment of existing property only. As the Court stated at [127]:
“As notional property does not exist, it cannot be identified to form part of the balance sheet recording the current items of the parties’ property.”
In other words, funds that have been spent simply cannot be added back to the pool, they no longer exist and therefore cannot be divided.
What Happens to Spent Funds?
The decision doesn’t mean that the way funds have been used or dissipated is irrelevant. Rather it shifts the focus. The Full Court made clear that expenditure of property prior to trial can still be taken into account, just not as part of the balance sheet. Instead, it should be considered as part of the holistic assessment of contributions under section 79(4) (section 90SM(4) for de facto cases) or as a factor relating to current and future circumstances under section 79(5) (section 90SM(5) for de facto cases).
For example, if one party has dissipated assets through wasteful or reckless spending, or has used joint funds for personal legal costs, the Court can still recognise this conduct through contribution or adjustment considerations, ensuring an overall fair result.
Key Takeaways for Practitioners
- Only existing property can be identified and divided under section 79(3) (section 90SM(3) for de facto cases).
- Notional property or “add backs” should not appear on the balance sheet.
- The use or dissipation of property remains relevant but must be considered through the contribution and adjustment framework under sections 79(4) and 79(5) (section 90SM(4) and 90SM(5) for de facto cases).
- Practitioners should frame their arguments accordingly, focusing on how the expenditure impacts contributions or future needs, rather than seeking to artificially inflate the asset pool.
Conclusion
Shinohara confirms what Stanford and Bevan foreshadowed, being the era of add backs as a balancing device in property proceedings is effectively over. The Family Court’s focus is now firmly on existing property, with issues of spent funds to be weighed through contributions and equitable adjustments rather than notional inclusions.
In practical terms, this decision demands a more nuanced and evidence-based approach from practitioners, ensuring that claims of dissipation or waste are properly argued within the statutory framework, rather than through the now defunct add-back mechanism.
If you need assistance with any of the above, please don’t hesitate to give our office a call on 07 5526 0167 to speak with one of our highly qualified family lawyers or email [email protected].
Article by Aspen Roggeveen
