Imagine you’re going through a separation, and your former partner has already withdrawn substantial funds from joint accounts or sold assets without your agreement. Under the old system, you might have expected the Court to simply “add back” those amounts to the property pool, treating them as if they still existed. After the landmark Full Court decision in Shinohara & Shinohara [2025] FedCFamC1A 126, that approach is no longer available.
This decision, delivered on 23 July 2025, has fundamentally transformed how property settlements in family law are determined in Australia. For separating couples, understanding these changes is crucialโnot just for Court proceedings, but especially for those seeking to resolve matters through mediation, where the new legal framework directly shapes what outcomes are achievable.
What Were Add-Backs?
Before the Family Law Amendment Act 2024 came into effect on 10 June 2025, the Courts applied a well-established practice known as “add-backs.” This concept allowed judges to notionally restore assets to the property pool even though those assets no longer existed at the time of trial.
The Full Court case of Omacini & Omacini (2005) FLC 93-218 identified three distinct categories of add-backs:
- Legal fees: Where one party paid legal costs from joint or individual assets
- Wastage: Reckless, negligent, or wanton dissipation of assets, such as gambling losses or extravagant spending
- Premature distribution: Early distribution of matrimonial property before formal settlement
The practical effect was significant. If your former partner had spent $100,000 from joint savings before trial, the Court could treat that amount as if it still existed in the pool. The spending party would then receive a reduced share of the actual remaining assets to account for what they had already taken.
This mathematical “fix” provided a relatively straightforward mechanism for addressing perceived unfairness when assets disappeared during separation.
The Family Law Amendment Act 2024: A Fundamental Shift
The amendments to the Family Law Act 1975 that commenced on 10 June 2025 introduced sweeping changes to property settlement law. Among the most significant was the rewording of section 79, which governs how Courts determine property settlements.
Under the new section 79(3)(a)(i), the Court must now identify “the existing legal and equitable rights and interests in any property of the parties to the marriage or either of them.”
The critical word is “existing.” According to the Attorney-General’s Department fact sheet, this language was deliberately chosen to limit the property pool to assets that actually exist at the time of trialโnot notional or historical assets that have since been disposed of.
The amendments also codify the four-step Stanford pathway that Courts have traditionally followed, while integrating enhanced recognition of family violence and its economic impacts into the assessment framework.
The Shinohara Decision: Confirming the End of Add-Backs
Background of the Case
The parties in Shinohara had a relatively short marriage of approximately five years. Following separation, they sold investment properties and their former matrimonial home. The proceeds from these sales were used to pay legal fees and other expenses.
By the time of trial, the parties had agreed to record approximately $592,768 as “add-backs” on their balance sheetโ$239,992 received by the father and $352,776 by the mother. The remaining pool available for distribution was approximately $589,155 (excluding superannuation, which was to be divided separately).
The primary judge at first instance did not include the notional add-backs in the asset pool, limiting the division to assets that existed at trial. This effectively halved the pool that the parties had expected to divide.
The Full Court’s Ruling
On appeal, the Full Court (Justices Williams, Altobelli, and Campton) delivered a unanimous judgment that, while allowing the appeal on procedural fairness grounds, definitively confirmed the legislative abolition of add-backs.
The Court stated unequivocally at paragraph 121:
“The text of s 79(3)(a)(i) is clear. Only the existing property of the parties is to be identified and only that existing property is to be divided or adjusted.”
This means that if money has been spent, assets sold, or property otherwise disposed of before trial, those amounts cannot be artificially restored to the pool. What exists is what gets divided.
How Dissipated Assets Are Now Treated
While add-backs as a balance sheet entry are abolished, the Full Court clarified that dissipated assets remain relevantโjust through a different mechanism. At paragraph 149, the Court explained:
“So that it is clear, s 79 now directs that the categories identified in Omacini pre-amendment 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.”
In practical terms, this means:
Under section 79(4) (Contributions): The Court can discount the contributions of a party who wasted or dissipated assets. If your former partner squandered $100,000 through gambling, this negatively affected their contributions to the relationship and can result in a percentage adjustment in your favour.
Under section 79(5) (Current and Future Circumstances): The Court can consider how the dissipation of assets has impacted each party’s current financial position and future needs. A party who has already received a benefit from spent funds may have their needs assessment adjusted accordingly.
Practical Implications for Separating Couples
Why This Matters for Your Settlement
The abolition of add-backs has profound implications for anyone navigating property settlement, whether through the Courts or, preferably, through mediation.
Financial decisions now carry permanent consequences. Money spent during separation cannot be mathematically restored. Parties can no longer assume that a mediator or judge will simply “add back” funds to equalise the pool.
Record-keeping is more critical than ever. Without the add-back mechanism, you must demonstrate exactly how dissipated assets should affect contributions or needs assessments. This requires detailed evidence of:
- When assets were disposed of
- Whether the disposal was agreed upon or unilateral
- How proceeds were used
- The impact on the overall pool composition
Early protective action may be essential. Since assets cannot be notionally restored, parties concerned about dissipation should consider seeking urgent Court orders such as asset preservation injunctions or interim property orders before funds disappear.
Why Mediation Is More Important Than Ever
The Shinohara decision and the 2025 amendments make family law mediation an even more attractive option for resolving property disputes.
Cost-effectiveness becomes paramount. Under the new framework, legal fees paid from joint assets cannot be added back. Every dollar spent on litigation permanently reduces the pool available for division. Mediation typically costs a fraction of Court proceedings, preserving more assets for both parties.
Speed protects the asset pool. Court proceedings can take months or years. During that time, assets can be depleted through ordinary living expenses, legal costs, or deliberate dissipation. Mediation can often resolve matters in days or weeks, capturing the pool at its highest value.
Control over outcomes remains with the parties. In Court, judges must apply the new legislative framework strictly. In mediation, parties retain flexibility to reach creative agreements that acknowledge past asset movements in ways that feel fair to both sidesโprovided the overall outcome is just and equitable.
Preservation of relationships. The adversarial nature of litigation often exacerbates conflict. Mediation’s collaborative approach helps preserve co-parenting relationships and reduces emotional harm.
At Mediations Australia, our experienced family mediators understand the implications of the Shinohara decision and can help you navigate the new property settlement landscape to achieve an outcome that works for your unique circumstances.
Practical Steps to Protect Your Position
Immediately After Separation
- Document the asset pool. Create a comprehensive record of all assets and liabilities as they existed at separation, including bank statements, superannuation valuations, property appraisals, and business accounts.
- Monitor financial movements. Keep records of any asset sales, withdrawals, or expenditure by either party following separation.
- Consider protective measures. If you have genuine concerns about asset dissipation, seek urgent legal advice about injunctions or caveats on property.
- Engage in mediation early. The sooner you commence resolution discussions, the more likely you are to preserve assets for division.
Preparing for Settlement Negotiations
Whether proceeding through mediation or Court, you must now be prepared to address dissipated assets within the contributions and needs framework rather than as balance sheet add-backs. This requires:
- Evidence demonstrating the timing and circumstances of asset disposals
- Arguments about how dissipation should affect contribution percentages
- Analysis of how each party’s current and future circumstances have been impacted
An experienced family mediator can help structure these discussions productively and guide both parties toward mutually acceptable solutions.
Formalising Your Agreement
Once you reach agreement through mediation, it is essential to formalise the outcome to ensure it is legally binding and enforceable. The two primary options are:
Consent Orders: These are orders made by the Court with the consent of both parties. They carry the full force of Court orders and can include property division, superannuation splitting, and spousal maintenance arrangements. The Court must be satisfied that the orders are just and equitable under the new section 79 framework.
Binding Financial Agreements: These are private contracts between the parties that do not require Court approval. Each party must receive independent legal advice, and the agreement must comply with strict formal requirements under Part VIIIA of the Family Law Act.
Your mediator can explain the advantages and limitations of each option and help you prepare for the next steps in formalising your agreement.
Looking Ahead: Adapting to the New Landscape
The Shinohara decision represents a watershed moment in Australian family law. For practitioners, litigants, and separating couples alike, the message is clear: the rules have changed, and strategies must adapt accordingly.
For those entering separation now, the key takeaways are:
- Act promptly to document and protect assets
- Maintain detailed records of all financial transactions
- Choose mediation to minimise costs and preserve the asset pool
- Understand the new framework when negotiating settlements
- Seek professional guidance from mediators and lawyers who understand the 2025 amendments
The abolition of add-backs does not mean that fairness is impossible to achieveโonly that the pathway to fairness has changed. Through careful preparation, informed negotiation, and the collaborative process of mediation, separating couples can still reach outcomes that appropriately recognise each party’s contributions and needs.
How Mediations Australia Can Help
At Mediations Australia, we specialise in helping separating couples resolve property settlement disputes quickly, cost-effectively, and fairly. Our nationally accredited mediators are fully across the implications of the Shinohara decision and the 2025 Family Law Act amendments.
We offer flexible mediation services including:
- Online mediation for convenience and accessibility
- Shuttle mediation where direct communication is difficult
- Legally-assisted mediation where parties wish to have lawyers present
Our goal is simple: to help you resolve your dispute faster, better, and cheaper than litigation while achieving an outcome that is fair and workable for both parties.
If you are navigating property settlement following separation and want to understand how the Shinohara decision affects your situation, contact Mediations Australia today for a confidential discussion.
