Clawing back assets in family law matters post the “Death of Addbacks”

The first stage in family law property matters is to identify the assets and liabilities of the parties. This is relatively simple, but what happens when an asset is no longer available for consideration, such as someone withdrawing and spending a significant amount of the funds within a joint bank account on gambling? Whilst recent changes to the law say we can no longer “addback” that property back into the property pool as notional property, this does not mean that the Court no longer has the power to make orders to account for such matters.

This article outlines the recent changes to addback, the circumstances when a Court will make an adjustment to an affected party, and includes recent case law on the subject.

The court’s general view

At the outset, in the recent case of Shinohara & Shinohara [2025] FedCFamC1A 126, the Full Court made it clear that property no longer in existence cannot be treated as property for the purposes of the Family Law Act and as such property (i.e. notional property) cannot appear on the Balance Sheet used to determine the parties’ property pool. The Court can only alter property that exists.

You can read more about the meaning of Shinohara in in this article on our website in ‘The end of addbacks in family law‘.

In any event, it remains the Court’s view that reasonably incurred expenditure does not amount to an addback and parties are not expected to go into a state of suspended economic suspension.

Where that presumption is displaced can tend to be broken up into three categories:

Legal costs
Premature distribution of matrimonial or defacto property; and
Wastage

The Court in Shinohara was careful not to extinguish the Court’s discretion to consider parties’ conduct when assessing the justice and equity of property orders. The Court also helpfully guided litigants to other sections of the Family Law Act that can offer parties relief in relation to the above categories.

Legal costs

Section 114UB(1) of the Family Law Act 1975 provides a presumption that parties must bear their own legal costs. However, usually, the bank accounts or assets that parties use to fund their legal costs form the assets that are contained within the property pool subject to the dispute. This can create an issue where if one party spends more than the other on legal costs, the first party is effectively wearing those costs as the property pool (and consequently their share of that pool) is diminished.

The Court in Shinohara noted that Section 79(5)(v) (for married couples) and Section 90SM(5)(w) (for defacto couples) both require the Court to consider “any other fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account”. The Court stated that such sections could be used by the Court to consider expenditure of legal fees.

Furthermore, the Court recently made a comment in Neville and Bowen [2025] FCWA 226 that in their view nothing in Shinohara stops a Court from taking into account paid legal fees pursuant to Section 79(5)(v) or Section 90SM(5)(w).

Accordingly provided there the funds used to pay legal fees come from property that would otherwise be available for distribution between the parties and is NOT from funds generated by a party post separation from their party’s own endeavours, each party’s legal fees can be considered as a relevant circumstance under Section 79(5)(v) or Secion 90SM(5)(w). If a party can not meet that threshold, the Court still has the discretion to adjust on a percentage basis (not necessarily dollar-for-dollar) to the affected party

Premature distribution of matrimonial or defacto property

This involves one party prematurely selling, realising or otherwise distributing to themselves property that should have been available for distribution between the parties. Common examples include:

Parties agree to distribute equal parts of net proceeds of the sale of the home to fund their lawyers whilst they negotiate the division of the remaining property.
Unilaterally, one party withdraws funds from a joint bank account but only if a party can demonstrate that the joint account holders keep the account for a specific or limited purpose.
Unilaterally, drawing down or increasing the mortgage on a property.

In another Full Court decision of Shamon & Shamon [2025] FedCFamC1A 150 (decided after Shinohara), the Court did not disturb a finding by the trial judge that the wife should receive a 25% adjustment due to future circumstances (Section 79(5)) because the Husband prematurely distributed $1,358,423 from the property pool.

The Court also helpfully referred to the case of Rosati which deals with the Court’s treatment of potential liabilities such as capital gains tax or other tax consequences. The Court did not disturb that case which stands for the Court being able to account for such consequences. You can read more about that case in this article.

Wastage

This is a common allegation in family law proceedings but the threshold to prove that a party has wasted property is a high one.

The seminal case on wastage is the case of Kowaliw and Kowaliw (1981) FLC 91-092. In that case, the Court said that losses incurred by parties in the course of their relationship should be shared by them (although not necessarily equally) except in the following circumstances:

where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or
where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.

As an example, gambling losses are a common wastage argument. However, it is important to look at those losses in the context of the parties’ overall/total assets as ultimately it is a legal activity.

Such matters have been codified in the law as something the Court must consider pursuant to Section 79(5)(d) (for married couples) and Section 90SM(5)(d) (for defacto couples): “the effect of any material wastage, caused intentionally or recklessly by a party”. Litigants can also rely on Section 79(5)(e) (for married couples) and Section 90SM(5)(e) (for defacto couples): “any liabilities incurred by either of the parties to the subject relationship or both of them, including the nature of the liabilities and the circumstances relating to them”.

Clawing back assets is a very technical aspect of family law, legal advice is essential before pressing such arguments. To obtain such advice please contact our firm on (02) 4944 3322 to make an appointment with our Accredited Specialist in Family Law, Mr Hayden Carr.