How Shinohara Changes Property Settlements

For many years in Australia, the Family Law Courts commonly used “add backs” when dividing property. If one party had spent or disposed of assets after separation, the court could treat those assets as if they still existed and include them in the property pool on paper.

That approach has now changed.

In Shinohara & Shinohara [2025] FedCFamC1A 126, the Full Court confirmed that, following the introduction of the Family Law Amendment Act 2024, Courts can no longer add back assets that don’t exist anymore.

What Happened in Shinohara?

The parties were married for about five years. After they separated, three properties were sold — the husband’s unit, the wife’s unit, and a jointly owned home.

By the time the matter went to trial, most of that money received from the sale of the three properties had been spent on legal fees and living expenses.

Both parties asked the court to “add back” the spent funds so the original asset pool could still be used for the property division. If that had happened, the pool would have been about double what was available at the time of trial

The trial judge refused. Because the money was gone, it was excluded entirely. That left a much smaller pool to divide.

Why the Decision Was Appealed

On appeal, the Full Court identified two important issues.

First, the parties were denied procedural fairness. The trial judge had not warned them that he might reject the add‑back approach. As a result, they were not given a chance to argue how the much smaller pool should be divided.

This particularly affected the wife. She had prepared her case on the assumption of a much larger pool of assets and was not given the opportunity to argue that her significant financial contributions — including a large monetary gift from her father — justified a higher percentage once the pool was effectively halved.

Second, and more importantly, the Full Court confirmed a major legal shift caused by the amended legislation.

No More Add Backs

Under the amended s 79(3)(a)(i), the court must now identify only the property that actually exists at the time of the hearing. Assets that have been spent or no longer exist cannot be included in the balance sheet, even notionally.

In simple terms - If the asset is gone, it’s gone.

This is a clear break from the previous practice of reconstructing a property pool by adding back dissipated assets.

How Spent Assets Are Now Treated

That doesn’t mean spent assets are ignored.

Instead of being added back into the pool, the way assets were spent is now considered as part of the Court’s overall discretion. The Court looks at:

• each party’s contributions during the relationship, and
• their current and future circumstances, including whether one party wasted or misused financial resources (including assets available at the time of separation).

The Full Court described this as a holistic assessment, aimed at reaching a fair outcome without artificially inflating the asset pool.

The Final Outcome

When the Full Court re‑made the decision, it did not add-back the funds spent by the parties.

Instead, it adjusted the percentage split of the property that still existed recognising the wife’s substantially greater contributions.

Why This Case Matters

Shinohara confirms that while the goal of fairness remains, the method has changed.

Parties can no longer rely on add backs to restore spent assets. Instead, the focus must be on explaining how and why assets were spent and demonstrating how that conduct should affect the percentage division of the remaining property.

If you have questions about how these changes may affect your property settlement, or would like advice specific to your situation, please contact our family law solicitors on (03) 9739 7377. Our family lawyers in Melbourne regularly advise clients across Carlton, Lilydale and the eastern suburbs on complex property settlement matters.