“Addbacks” were a legal mechanism allowing courts to notionally “add back” property or funds that had been spent or dissipated by one party, treating them as if they still existed for the purposes of dividing the asset pool. This often-included funds spent on legal fees, gifts, or unexplained withdrawals.
The Family Law Amendment Act 2024 changed this, and this issue has now been considered by the Full Court of the Federal Circuit and Family Court of Australia in Shinohara which has decided that, under the new section 79(3), only property that still exists can be divided. Notional property or “addbacks” can no longer be included on the balance sheet for division.
Does this mean past property is irrelevant?
No. While addbacks are no longer available, property that no longer exists can still be relevant as follows:
- Contributions: Past contributions (such as funds brought into the relationship or inheritances) that cannot be traced to current assets may still be considered when assessing each party’s overall contributions.
- Current and Future Circumstances: The fact that assets have been disposed of may be relevant under section 79(5) when considering what Order is just and equitable, especially if, had the property not been disposed of, the parties would have more assets now.
However, these matters are now part of the broader assessment of contributions and circumstances, rather than being specifically “added back” as notional property.
The Shinohara case: What happened?
Shinohara involved a short marriage (six years) with a modest asset pool (just over $600,000 plus superannuation). The wife had made significantly greater contributions, including bringing in funds and inheritances. The trial judge included substantial addbacks, some relating to legal fees, but the evidence was unclear and incomplete.
The Full Court found that the trial judge had not given the parties an opportunity to make submissions on how contributions should be assessed if addbacks were excluded. This was a breach of procedural fairness, particularly to the wife, and the appeal was allowed.
Practical implications for clients
Evidence of Contributions Is Critical:
- Parties must provide clear, documentary evidence of assets brought into the relationship, including their value at the time.
- If assets or inheritances are no longer in the pool, a detailed explanation of what happened to them is essential.
Legal Fees and Wastage:
If funds were spent on legal fees or are alleged to have been wasted, the amounts and reasons must be clearly articulated and supported by evidence.
Procedural Fairness:
If the court intends to disregard addbacks, parties must be given the opportunity to make submissions on how contributions should be assessed based only on existing assets.
The law going forward
The Full Court in Shinohara held that the amended Family Law Act requires only existing property to be identified and divided. Addbacks are no longer to be included on the balance sheet, though information about legal fees may be considered as a relevant factor.
The underlying case law on contributions and the impact of disposed assets remains relevant, but these factors are now considered as part of the overall assessment of contributions and circumstances, not as notional property.
How can Baker Love Lawyers assist?
The abolition of addbacks marks a significant shift in family law property settlements. While property that no longer exists cannot be notionally included in the asset pool, its history and the circumstances of its disposal remain relevant to the court’s assessment of contributions and what is just and equitable. We can assist you to ensure that you provide comprehensive evidence of all contributions and be prepared to explain any assets no longer in the pool.
If you have any questions regarding this article or any associated family law matter please contact our firm an make an appointment with our family law team on (02) 4944 3322.
