Are addbacks dead?  The recent Full Court decision in Shinohara & Shinohara [2025] FedCFamC1A 126 (‘Shinohara’) would suggest that they are, but should they be?

Addbacks in property settlement matters had been a part of our landscape for some time.  Indeed, a pro forma Balance Sheet that specifically allowed for addbacks was created for use in the then Family Court and continues to be so.

The most common forms of addbacks fell into these categories:

1. Paid legal fees – this was a generally accepted addback albeit there was often banter about whether or not those fees were paid from the parties’ assets, eg, pre separation savings, or from post separation earnings.
2. Partial distribution – this was also a generally accepted addback where it was characterised as a partial distribution at the time of that distribution. That is, sometimes it may have been uncharacterised and then there would be an argument at trial in this regard, sometimes it may have been a lump sum costs order or it may have similarly been a lump sum spousal maintenance order.
3. Wastage – this generally related to gambling or other forms of wastage such as excessive alcohol consumption or expenditure on the pursuit interests in respect of which there was no benefit to the household.

Prior to 2012 addbacks were regularly included on Balance Sheets and often it was one of the preliminary matters that a Trial Judge had to determine, arguably occupying a large amount of court time unnecessarily.

Although not strictly an addback case, the issue of existing legal and equitable interests of the parties -v- notional assets was discussed by the High Court in the decision of Stanford & Stanford (2012) 247 CLR 108, in the context of parties who were separated only as a result of one party requiring aged care, rather than the parties choosing to be legally separated.  Not long after, the Full Court decision in Bevan & Bevan (2013) FLC 93-545, involved considerable analysis of notional property and whether it could be considered property of the parties to the marriage or either of them as it was property that simply no longer existed.  Again, Bevan itself was not an addback case but led to the Court taking a different look at Balance Sheets and the nature of assets – actual or notional and dealing with notional estate not as an asset but generally as a contribution factor, either positive or negative.  However, there was no alteration made to the pro forma Balance Sheet, produced by the Court for use by litigants, and many continued to include notional assets as addbacks.

Shinohara involved a first instance decision prior to the 10 June 2025 amendments to the Family Law Act (‘the Act’) but an appeal that was decided after that date.  Accordingly, the Full Court, on a re-exercise of discretion, applied the new provisions as set out in section 79.  Although this appeal involved both parenting and property issues, we deal here only with the property appeal.

In Shinohara, the parties had an agreed Balance Sheet that included a lot of addbacks that were nonsensical in that they included property sold long ago for the purpose of contributing to a jointly purchased property which was then subsequently sold.  However, as it was an agreed Balance Sheet the submissions made by the parties as to the distribution was on that basis.  The Trial Judge had not warned the parties that the notional assets would be removed from the Balance sheet thereby allowing them to make different submissions.  Interestingly, the appeal was successful, in part, not based on grounds or submissions of the appellant but by errors identified by the Full Court that amounted to a miscarriage of justice.  Specifically, rejecting the Balance Sheet upon which the parties had based their submissions but not then affording them the opportunity of amending/changing their submissions.

The Court found that the newly created section 79(3) (a) requiring the identification of:

• the existing legal and equitable rights and interests in any property of the parties to the marriage or either of them

could not include notional property, that is, property that no longer exists at the date of the hearing.