When One Party Wastes Money During Separation: What the Court Can Now Do
Recent developments in Australian family law have significantly altered the way courts approach property settlements. With the commencement of the Family Law Amendment Act 2024 and the landmark decision in Shinohara & Shinohara [2025], the long-standing practice of “add-backs” has been effectively brought to an end.
For practitioners and separating parties alike, this marks a substantial shift in both strategy and outcome when resolving financial matters.
What Were “Add-Backs”?
Traditionally, courts had the discretion to notionally “add back” assets that had been dissipated, wasted or prematurely distributed by one party. This often included funds spent on:
- excessive legal fees
- gambling or reckless expenditure
- holidays or luxury purchases
- deliberate depletion of joint assets
These amounts would be reintroduced into the property pool on a notional basis, allowing the court to assess the division of property as if those assets still existed.
The New Position: Focus on Existing Property
From 10 June 2025, the legal landscape has changed.
Courts are now required to assess only the assets and liabilities that exist at the time of the final hearing. In practical terms, this means:
- No notional assets will be included in the property pool
- The court will not “recreate” money that has already been spent
- The property pool reflects the actual financial position, not a reconstructed one
This represents a move toward a more literal and present-day assessment of the parties’ financial circumstances.
Addressing Waste Without Add-Backs
Importantly, the removal of add-backs does not mean that reckless or intentional dissipation of assets is ignored.
Instead, the court now addresses such conduct through adjustments to the final percentage division.
Where one party has:
- deliberately reduced the asset pool or
- engaged in reckless or wasteful spending,
the court may compensate the other party by awarding them a greater share of the remaining property.
This approach reframes dissipated funds as a form of premature distribution, rather than something to be mathematically reinstated.
The Role of Evidence
Under this new framework, evidence becomes even more critical.
Parties seeking to rely on allegations of waste must now clearly demonstrate:
- the nature and extent of the expenditure
- the intention or recklessness behind it
- the impact on the overall asset pool
Without strong evidence, there is a real risk that such conduct will not meaningfully influence the final outcome.
Practical Implications
This shift has several important consequences:
- Legal Fees
The use of joint funds for legal costs will no longer be routinely added back. Instead, it may result in an adjustment against the spending party’s final entitlement. - Everyday Living Expenses
Reasonable expenditure during separation-such as housing, food and general living costs-is unlikely to attract adverse findings. - Strategic Considerations
Parties can no longer rely on the expectation that dissipated funds will automatically be restored to the pool. This may influence both litigation strategy and settlement negotiations.
The Impact of Shinohara
The decision in Shinohara & Shinohara [2025] firmly confirmed this new direction. The Court made it clear that add-backs are no longer part of the standard methodology for determining the property pool, reinforcing the legislative intent behind the 2024 amendments.
Conclusion
The abolition of add-backs represents a fundamental shift in Australian family law. By focusing solely on existing property and addressing misconduct through percentage adjustments, the courts have adopted a more streamlined-but arguably less forgiving-approach.
For parties navigating a property settlement, this underscores the importance of:
- maintaining transparency in financial dealings
- avoiding conduct that could be characterised as wasteful
- obtaining timely legal advice tailored to the new framework
As with many areas of family law, the practical application of these changes will continue to evolve through future decisions.
The above is general information only. If you require advice or assistance with navigating a family law matter, contact the experienced team at Miller Sockhill Lawyers on 07 5444 4750.