Understanding Add Backs and Notional Property in Family Law
There has been a significant development in family law in Australia in how the Federal Circuit and Family Court of Australia deal with add-backs (or notional property) during property settlement proceedings.
The Full Court of the Federal Circuit and Family Court of Australia has recently delivered a judgment that changes how assets that no longer exist at the time of a hearing—such as funds already spent or property disposed of—are considered in the division of property.
What Are Add backs and Notional Property?
In family law, “add backs” refer to the process of notionally adding back into the asset pool property or money that has been spent or disposed of before the final hearing (and therefore is considered relevant to the situation, but no longer actually exists). This often includes funds used for legal fees, funds wasted on alcohol or gambling, or assets sold or disposed of by one party without the consent of the other party to the proceedings.
The Full Court’s Decision- Shinohara & Shinohara [2025] FedCFamC1A 126
Key Issues Considered
- Should notional property (property that no longer exists) be included in the asset pool for division?
- How should previous disposals of property affect the outcome?
The Court’s Findings
- Notional property cannot be included in the balance sheet under section 79(3) of the Family Law Act (FLA).
- However, previous disposals of property may still be relevant—they can inform the court’s assessment of each party’s contributions or their future needs.
The Court’s Reasoning
In summary, the Court has indicated that the approach in all matters moving forward should be that, rather than forcing missing or spent assets back into the asset pool, the court will now focus on how those assets were used and whether their use affects fairness.
This decision could have a significant impact on parties involved in family law proceedings, particularly where the assets that remain in an asset pool are of a lesser value than those that were utilised by the other party. It also remains to be seen how this approach will play out in cases where there is a large imbalance in legal fees between parties.
Key Takeaways
- If you are involved in a family law matter, it is now more important than ever to keep clear records of how assets are used or disposed of before your hearing.
- The focus has shifted from “adding back” missing assets to considering their impact on contributions and future needs.
- Legal advice is crucial if you are concerned about how your actions—or your former partner’s actions—may affect your property settlement.