Case Note: Shinohara & Shinohara [2025] FedCFamC1A 126

Introduction

On 23 July 2025 in Shinohara & Shinohara [2025] FedCFamC1A 126 (“Shinohara”), the Full Court put an end to the long-established family law practice of notionally ‘adding back’ to the asset pool, at step 1, property that no longer exists. While in Bevan [2013] FamCAFC 116, the Full Court questioned the use of addbacks, differently constituted Full Courts have since consistently authorised the use of addbacks as a legitimate pathway to calculate a just an equitable property settlement order.

So, what does this mean for everyday practice?

Why This Case Matters

Shinohara is the first appellate authority interpreting the amended s 79 provisions following the Family Law Amendment Act 2024 (Cth) (“the Amendment Act”), which took effect on 10 June 2025. It represents a significant shift in how Courts approach ‘addbacks’ and confirms that:

• Property no longer in existence cannot be treated as "property" under s 79(3)(a) of the Family Law Act 1975 (Cth) (“the Act”) when the Court is making property adjustment orders pursuant to s 79(1).

• Instead, such property should ordinarily be considered as a current or future circumstance under 79(5).

• Addbacks should no longer appear on the balance sheet, although they remain relevant to the Court’s broader discretionary exercise.

Key facts

• The facts of the property case were unremarkable. The parties cohabited for slightly more than 6 years and separated in February 2023. There were two children aged 6 and 4. The wife suffered from mental health challenges. Since the separation in February 2023 the children had lived primarily with their father, with the mother having limited supervised time.

• The balance sheet provided to the Trial Judge, and to the Full Court when re-exercising their discretion, adopted a two pool approach placing the parties’ superannuation interests of $616,330 into one pool and all other property including addbacks of $1,209,399 into a second pool. That non superannuation pool consisted of $616,631 in existing assets and $592,768 in notional property added back. The notional property included the money each party had expended having both received partial property settlements and the proceeds of the sales of two properties which were in the respective names.

• The parties had agreed to a splitting order, in favour of the wife, of the husband’s superannuation so that their respective superannuation interests were close to being even, with the husband's interest still being $32,802 more than the wife’s.

The Appeal

In Shinohara the Full Court upheld an appeal against the property order on the grounds that the Trial Judge had not provided procedural fairness when he removed agreed addbacks from the balance sheet without notice to the parties and that he had failed to take into account six material considerations which favoured the wife.

The Full Court was requested to re-exercise its discretion to vary the order on the basis of the same material that was before the trial judge. In its reasoning the Full Court also removed the addbacks from the agreed balance sheet, concluding that the new amendments prohibited them from being there.

The wife brought significantly greater funds into the relationship and was gifted $400,000 by her father when the matrimonial home was purchased in 2021.The Wife received a 70/30 split on contributions and the husband received a 2.5% adjustment based on current and future circumstances.

The ultimate outcome was that the wife received a 67.5% division of the non-superannuation assets, with the add backs removed, being $416,226 and the Husband received 32.5 per cent being $200,405.

In the Full Court’s reasoning, the notional assets that had been removed from the balance sheet were dealt with when considering s79(5) factors at Stage 3. The Full Court discussed eight different considerations as relevant. It dealt with the notional property that had been removed from the balance sheet at 135(d), noting the mother received $352,776, being $112,784 more than the father, who retained or received $239,992.

Having discussed the eight s79(5) considerations, the Full Court gave an adjustment to the father of 2.5% being $15,415, and a difference of $30,830. [137]. The Full Court in Tomasetti [2000] Fam CA 314 at [113]-[114] made it clear that it's not appropriate to assign a percentage or mathematical value to individual s79(5) considerations and consequently it's impossible to know to what extent the full amount of the differential of $112,784 in relation to notional assets, of which the wife has had the benefit, have been taken into account.

Key Legal Issue: Addbacks Post-Amendment

The Full Court referred to some of the development of addbacks in the caselaw and considered their original purpose: to ensure that assets disposed of unilaterally were properly considered in any application for the alteration of property interests and to ensure that the overarching purpose – of ensuring a just and equitable outcome – is achieved in each case.

For as long as addbacks have existed, caution has been expressed in their use. For example, the 1998 case of Cerini & Cerini [1998] FamCA 143, said that their use should be the exception, rather than the rule. Ultimately, the case law evolved in such a manner that the decision of whether or not to allow addbacks was at the discretion of the Trial Judge in the appropriate cases.

Four Traditional Categories of Addbacks

The Full Court referred to the previous Full Court decision in Omacini & Omacini (2005) FLC 93-218 which outlined that there were three distinct categories of addbacks which, in the appropriate case, could be notionally added back to the pool of assets. They were:

1. Legal fees paid from joint or individual assets (Farnell [1995] FamCA 140);

2. Premature distribution of matrimonial property (Townsend [1994] FamCA 114); and

3. Wastage: reckless, negligent, or wanton dissipation (Kowaliw [1981] FamCA 70; principles set out by Baker J).

In a nutshell, notionally adding back property that should have been part of the asset pool but for the actions and behaviour of one of the parties.

In addition it has become usual to include as an add back on a balance sheet, monies received by a party as a result of a partial property settlement order, to the extent that those monies have not been used to acquire other assets that are on the balance sheet.

Interpreting the New s 79(3)

The question for practitioners then becomes – does the new section 79(3)(a) allows addbacks when it speaks of the ‘existing legal and equitable rights and interests’ of the parties?

The Full Court concluded:

• At [124] the Full Court said that the text of s 79(3)(a)(i) was clear and that only the existing property of the parties is to be considered at step 1 in any application for the alteration of property interests.

• At [124] the Full Court nominated those subsections of 79(5) that it said might now be relevantly engaged to deal with notional assets:

1. s 79(5)(d) – wastage: consideration as to whether a party has engaged in wastage of property or financial resources; and

2. s 79(5)(n) contributions to the other parties’ current and future circumstances: consideration as to the extent to which each party has contributed to the property or financial resources of the other party at the time of the trial (this could encompass interim or partial property settlement or payments by way of litigation funding); and

3. s 79(5)(v): being the ‘catchall’ provision (formerly section 75(2)(o)) which could capture the category of notional addbacks identified in Townsend or Omacini or the expenditure of property on legal fees).

At [126] the Full Court went on to say that the previous approach, being a holistic assessment of considering and determining contributions, should not change. Regardless of which step the addback is considered, it should still be considered along with the following particulars:

• the circumstances of the disposal;

• the value it achieved; and

• the use and application of the property disposed.

At [131(l)] the Full Court concluded:

"The gross value of funds…that no longer exist …may be material in considering contributions up until the time of assessment, dependent on the use made by each party of the funds received coming within the ambit of s 79(4)(a)–(c) factors".

But then at [131(l)(i)-(iii)] The Full Court went on to say that, in the facts of this case:

"The [Wife] did not submit, nor do we accept, that the use of the funds to pay legal fees would equate to a contribution of those funds. [The Wife] alone benefited from these expended funds. This use and application of property has consequential effects on the assessment of current circumstances, rather than being considered as a negative contribution (Antmann & Antmann (1980) FLC 90-908)".

Consequently the Full Court concluded the $592,768 that no longer existed ought to be taken into account by way of s 79(5) as a consideration of the current financial circumstances of the parties.

Implications for Practice

What now for Addbacks?

1. Addbacks as property: No longer valid post-amendment.

2. Consideration of disposed assets:

• Given the negative contributions are not recognised, notional assets would rarely be a factor to take into account in a contribution assessment (s 79(4));

• Wastage (s 79(5)(d));

• Consideration to the extent to which each party has contributed to the property or financial resources of the other party at the time of trial (s 79(5)(n)); and

• Any other fact or circumstance which the justice of the case requires to be taken into account(s 79(5)(v)).

Practical Steps for Practitioners

• Carefully assess whether disposed assets are relevant to contributions or need to be raised under wastage principles.

• Prepare detailed evidence on:

1. Circumstances of the disposal,

2. Use of proceeds,

3. Whether the disposal was agreed or unilateral,

4. Any impact on the size and composition of the pool.

5. Avoid simplistic “addback” balance sheets whilst at the same time realistically assess at Step 3 the real benefit that one of the parties has had from disposed assets.

Upcoming

LEAP Family Law AU will shortly be releasing a video discussion on Shinohara by the Hon Garry Watts AM which will deal in more detail with the case and include:

• a discussion of the law that existed prior to Shinohara

• the reasons given for the killing off addbacks

• what possible approaches are still available to deal with cases in which addbacks would have traditionally featured

• some potential unintended implications flowing from the logic of the reasoning