Tom Zreika
The Situation Post-10 June 2025: Impact of the New Amendments
With the commencement of recent legislative amendments on 10 June 2025, there has been renewed focus on the concept of “addbacks” in family law property proceedings.
Are the Principles from Chorn & Hopkins Still Good Law?
An addback traditionally involves treating certain dissipated or spent funds as if they still exist for the purposes of the property pool, effectively including “notional property” at Step 1 of the property division process. Common examples include:
- Legal costs paid from joint funds.
- Funds received through interim distributions that have since been spent.
- Wasted or improperly used joint assets; and
- Expenditures deemed excessive or unnecessary.
This technique is used to ensure that the party who derived the benefit from these expenditures bears the financial impact.
It has often been considered preferable to address these issues at Step 1 rather than Step 3, where their full effect might not be properly accounted for.
The Full Court in Chorn & Hopkins [2004] FamCA 633 endorsed this reasoning, and while it hasn’t been expressly overturned, later decisions, particularly Bevan & Bevan [2013] FamCAFC 116, cast doubt on its ongoing application in light of Stanford v Stanford.
That said, Chorn & Hopkins continued to be applied even in recent decisions, such as Martell & Martell (No 2) [2023] FedCFamCA 150.
However, the legislative landscape has now shifted. The new provisions (ss 79(3)(a)(i)/90SM(3)(a)(i)) limit Step 1 to actual legal and equitable interests, and wastage is now expressly dealt with at Step 3.
Wastage under s 79(5)(d)/s 90SM(5)(d)
While parties often want to share in the financial gains of a relationship, they rarely wish to share in its losses. Justice Baker in Kowaliw set the foundational principle: financial losses during a relationship should be shared – unless caused by a party’s intentional, reckless, or negligent conduct that diminishes the asset pool.
Historically, where one party squandered joint funds, courts have included that value in the balance sheet as a notional asset (see Omacini & Omacini [2005] FamCA 195 at [30(c)]), holding the responsible party solely accountable.
Under the new s 79(5)(d)/s90SM(5)(d), courts are empowered to consider the effect of intentional or reckless dissipation of property or resources at Step 3.
Shinohara & Shinohara [2025] FedCFamC1A 126: The Turning Point
In this recent Full Court decision (23 July 2025), the Court reviewed the treatment of addbacks during an appeal concerning property settlement. While the parties had agreed on the division of superannuation, disputes remained over proceeds from the sale of the former matrimonial home and a childcare subsidy debt.
At trial, the judge excluded previously received and spent funds, such as interim distributions and sale proceeds, from the property pool, despite both parties assuming they would be included. The judge did so without allowing the parties to respond to this shift in approach.
On appeal, the Full Court found this exclusion procedurally unfair and inadequately reasoned. Importantly, the Court clarified that:
- Under the amended s 79(3), only existing legal or equitable interests can be included in the balance sheet.
- Notional addbacks (spent funds) can no longer be treated as assets for division.
However, the underlying conduct remains relevant and may influence the Court’s discretion under s 79(4) (contributions) and s 79(5) (other circumstances).
The ruling decisively marked the end of the addback doctrine as a tool to increase the size of the divisible property pool.
The Status of Chorn & Hopkins
Chorn & Hopkins remains an important historical authority on addbacks. However:
- The High Court in Stanford, and later the Full Court in Bevan, clarified that only existing property interests can be divided.
- In Shinohara, the Full Court expressly stated that under the current s 79(3), notional assets cannot be included in the balance sheet.
Although the factual scenarios from Chorn & Hopkins (legal fees, premature distributions, waste) are still relevant, they now inform assessments under s 79(4)-(5), rather than appearing as assets on the balance sheet.
Has Chorn & Hopkins Been Overruled?
Not explicitly. But its practical effect has been superseded. While the case hasn’t been overturned in name, the approach it sanctioned, treating spent funds as property, can no longer be applied under the current legal framework. The identified categories of addback conduct remain significant, but the method of accounting for them has shifted from Step 1 to the holistic assessment under s 79(4) and s 79(5).
Key Takeaway
In Shinohara & Shinohara, the Full Court confirmed a significant shift in approach post-2024 amendments, and the following is a summary of the current legal position on addbacks:
- Property that no longer exists at trial (such as dissipated or spent funds) cannot be added back into the divisible asset pool – so not included in the balance sheet: notional assets cannot be added back at Step 1.
- Add backs are still relevant: conduct such as dissipation or legal fees may impact contribution analysis and s 79(5) considerations. These issues are instead to be assessed as part of each party’s contributions or relevant circumstances.
- The addback doctrine, once a feature of property division, is no longer compatible with the amended s79(3).
- Chorn & Hopkins is of historical interest now and no longer guides the construction of the matrimonial pool.
The Full Court confirmed that notional addbacks and dollar-for-dollar adjustments are outdated; such matters must now be addressed through contribution assessments or under s 79(5) and must not be included in the balance sheet.