A recent decision from the Full Court of the Federal Circuit and Family Court of Australia (Division 1) has brought major changes to the way property settlements are calculated under the Family Law Act 1975.

In Shinohara & Shinohara (No 2) [2025] FedCFamC1F, the Court confirmed that “add backs” — the practice of notionally including assets that no longer exist in the divisible property pool — are no longer permitted. This follows the 10 June 2025 amendments to the legislation, which have narrowed the scope of what can be included in the balance sheet.

For separating couples and practitioners in Queensland, this means a shift in how property matters are argued and decided.

What Are ‘Add Backs’?

Before these changes, Courts often used add backs to treat certain funds or property as though they still existed, even if they had been spent or sold before trial.

This typically applied to:

• Money spent on legal fees
• Funds withdrawn and used for personal purposes
• Assets sold or transferred in what the Court considered a wasteful or premature way

For example, if one party sold a property and used the proceeds for their own benefit, the Court could “add back” the value of that property into the pool and divide it as if it still existed.

The Facts in the Shinohara Case

In Shinohara, the separating couple had sold several properties during the course of their matter:

• The husband’s Suburb EE unit
• The wife’s Suburb FF unit
• Their joint Suburb BB home

The proceeds from these sales — totalling hundreds of thousands of dollars — were mostly used for legal costs and other expenses. Early in the case, both parties agreed to include notional add backs of around $592,768 in the property pool.

At trial, the judge did not add these amounts back. Instead, the balance sheet only included the property that still existed: roughly $589,155 in trust funds, some vehicles, an e-bike, and a small shareholding.

The Appeal

The mother appealed, arguing that it was procedurally unfair for the trial judge to disregard the parties’ mutual agreement to include the add backs. She said her case had been prepared on the assumption that the agreed amounts would be part of the pool.

The father’s position was different. He argued that the amendments to s 79 of the Family Law Act 1975 had not removed the Court’s discretion to add back amounts. He relied on earlier cases like Omacini, which recognised certain categories of add backs as a legitimate part of family law property settlement.

The Court’s Decision

The Full Court examined the wording of the amended s 79. The section now requires the Court to determine only the “existing legal and equitable rights and interests” in property at the time of trial.

The Court concluded that:

• If an asset no longer exists, it cannot be included in the pool.
• There is no remaining discretion in s 79(3) to notionally add back assets.
• The explanatory memorandum does not preserve the add back practice.

However, this does not mean the issue disappears altogether. The Court confirmed that the same situations that used to be treated as add backs — such as waste, premature distributions, or legal fees — are still relevant, but they must now be addressed differently:

• Under s 79(4) – as part of the contribution history (how each party used or dealt with property before trial)
• Under s 79(5) – as part of current and future needs (e.g., where wasteful expenditure affects one party’s financial circumstances going forward)

The Outcome in Shinohara

The appeal was allowed. The Court found there had been procedural unfairness because the trial judge did not address the parties’ mutual understanding about add backs.

When re-exercising discretion, the Court assessed contributions and needs without adding the amounts into the pool. Instead, the dissipation of property was factored into the assessment under ss 79(4) and (5).

Why This Matters for Queensland Clients

If you are in a property settlement dispute in Queensland, this change is important for several reasons:

1. No more “notional property” in the pool – If property has been spent, sold, or otherwise no longer exists, it won’t be counted in the balance sheet.
2. The focus shifts to evidence and context – You and your lawyer will need to show how those missing assets should be considered under contribution or needs provisions.
3. Timing is key – How and when assets are used during separation can make a difference to the final division, even if they can’t be added back.

Example Situations Under the New Law

• Example 1: You sell an investment property before trial and use the proceeds to pay off personal debts. The value of that property can’t be added back, but your ex-partner can argue that this affects their contributions and they should receive a larger share of the remaining pool.
• Example 2: Your former partner withdraws funds from a joint account to fund expensive litigation. Those funds can’t be put back into the pool, but you can argue that this reduces their overall contribution and increases your needs.

Practical Steps If You’re In This Situation

1. Keep detailed records – Bank statements, invoices, and receipts can be crucial in showing how property was used.
2. Get early advice – The sooner you speak to a lawyer, the better prepared you’ll be to argue contribution or needs issues.
3. Understand the new approach – Old strategies focused on add backs may no longer apply. Your legal team will need to adapt to the new framework.
4. Don’t delay – Actions taken before trial can still have a big impact, so it’s important to address them quickly.

The Bigger Picture

The Shinohara decision, combined with the 2025 amendments to the Family Law Act 1975, marks a shift towards greater transparency in property settlements. The Court is now required to focus solely on existing property at trial, with past dealings feeding into contribution and needs assessments rather than the mathematical balance sheet.

This may simplify the pool calculation, but it also places a greater burden on parties to provide evidence and make persuasive arguments about how past use of property should affect the overall outcome.

For separating couples in Queensland, the days of “add backs” in the balance sheet are over. While the same issues can still influence the outcome, they must be argued differently and supported with strong evidence.

If you’re in a property settlement dispute — especially one involving asset sales, significant expenditure, or disputes over financial conduct — it’s vital to understand how these changes apply to your case.