In Shinohara & Shinohara, the Full Court of the Federal Circuit and Family Court of Australia (Division 1) delivered a landmark ruling that reshaped how property settlements are approached, particularly in light of recent amendments to section 79 of the Family Law Act 1975 (Cth). Most notably, this decision firmly put an end to the long-standing practice of notionally ‘adding back’ property that no longer exists—commonly referred to as “add-backs.”
Traditionally, family lawyers, parties and the Court followed the rule in cases like Bevan, where funds or property that had been used or lost courts could notionally added back to the property pool, even though they no longer actually existed. Common examples of classes of these funds or property include money spent on legal fees, or wasted funds/property.
The 10 June 2025 amendments to the Family Law Act sets out explicitly the steps used to determine the outcome of financial matters.
- Identify the legal and equitable rights and interest in any property of the parties and any liabilities of the parties, creating a balance sheet;
- Assess the contributions of the parties to the relationship;
- Assess the current and future circumstances of the parties;
- Apply the outcome to the balance sheet and formulate orders to execute property settlement.
Unlike in the days of Bevan it would appear now that parties are restricted to property that exists at the time of the making of the orders.
What Happened in Shinohara?
Key Facts
The case involved the sale of multiple properties during separation, with the resultant proceeds largely expended on legal fees and other outlays. Both parties had initially agreed, for settlement purposes, to “add back” approximately $592,768 to the balance sheet—even though those funds no longer physically existed.
At trial, the judge rejected these notional amounts, instead confining the divisible property to actual assets available at the time: roughly $589,155 in trust plus tangible items like vehicles, an e-bike, and a small shareholding.
Appeal Grounds & Outcome
On appeal, the Full Court found that the trial judge’s removal of the add-backs without warning constituted procedural unfairness, but agreed in principle and made it clear that add-backs cannot be included in the asset pool under the amended section 79(3)(a). The Court agreed to re-exercise its discretion,
In re-exercising its discretion, the Full Court acknowledged the impact of asset dissipation, but treated it under sections 79(4) (contributions) and 79(5) (current and future circumstances), not as balance-sheet property. Their Honours said:
[125] “Categories… that were notionally added back are to be considered in ensuring a just and equitable outcome, either by way of historical contributions, or by way of their relationship to and impact upon the current and future circumstances at the s 79(5) stage.”
[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”
Re-exercise of discretion
The Full Court examined the contributions made by each party, including their financial contributions to properties which had since been bought and sold, attempts to pay back debt (rather than doing this by way of notional addback), along with their current and future circumstances.
The Full Court decided to set aside Orders 40 and 41 of the trial judge’s orders.
- a) The balance of the proceeds of sale of the former matrimonial home be paid 50% to the wife and 50% to the Husband; and
- b) The child care subsidy debt of $21,994.89 must be paid equally by the parties.
The Full Court Orders:
- a) The Husband pay the Wife $115,262.50
- b) The Husband pay the Wife 50% of the child care subsidy debt after the Wife confirms she has paid the full amount.
At trial the overall percentage split (including superannuation) was 52% to the Husband and 48% to the wife. The Full Court’s re-exercise of resulted in the Husband receiving 42% and the Wife receiving 58% of the pool.
Key take aways
No more add-backs in balance sheet. The Shinohara decision marks a foundational shift: courts must now base property settlement solely on assets that exist at trial. Notional property is excluded from the balance sheet, though dissipation may still influence outcomes via other lenses under section 79 such as the overall equity and justice of an order, contributions and current and future circumstances.
For clients
These changes in legal principles don’t just effect judges and matters that are in or going to Court. It’s important to partner with a legal team who can help you navigate the changing landscape of property settlement and ensure you don’t miss out.
Book a free initial consultation today to find out how we can help you.