Add-Backs” Are Dead (as Balance-Sheet Assets): The Appeal That Redrew Property Settlement Maths Under the New s 79

In Shinohara & Shinohara [2025] FedCFamC1A 126 (Williams, Altobelli & Campton JJ, 23 July 2025), the Appellate Division delivered a decision that is precedent-setting for Australian family law property work after the 10 June 2025 amendments to s 79. The Court held that so-called “add backs” / “notional property” that no longer exists cannot be listed as property in the s 79 balance sheet, because s 79(3)(a)(i) now requires the Court to identify only existing legal and equitable interests at the date of assessment. Instead, the historic “add-back categories” (legal fees, premature distribution, wastage) must be dealt with within s 79(4) contributions and/or s 79(5) current/future circumstances, as part of a holistic justice-and-equity assessment.

🧩 Facts and Issues

Facts: The parties separated in February 2023 and had two young children. Parenting orders largely favoured the father (including “tethered” progression of the mother’s time to therapy compliance) and the parenting appeal was dismissed. The property appeal was narrowed during the hearing to challenge only Orders 40 and 41 dealing with (1) the division of the remaining $589,155 sale proceeds of the former home and (2) responsibility for a Centrelink childcare subsidy debt.

A major practical complication was that both parties’ trial submissions assumed “add backs” (proceeds from earlier real property sales and partial distributions that had since been spent), but the primary judge effectively proceeded on an “existing assets only” pool without giving the parties a fair chance to address the consequences—creating a drastic distortion in the pool used for percentage arguments.

Issues:

1. Appeal procedure: What are the consequences where appeal grounds and the Summary of Argument are poorly drafted and do not properly engage with each other? (r 13.23)
2. Property appeal error: Did the primary judge err by procedural unfairness, failure to consider material matters, and inadequate reasons in making Orders 40–41?
3. Re-exercise under new law: On re-exercise, does amended s 79(3) permit “add backs” to be included in the balance sheet as if they were still property?

⚖️ Applicable Law – Legislation, Regulations, Rules

Family Law Act 1975 (Cth)

• s 79 (as amended from 10 June 2025): requires identification of existing property interests and liabilities (s 79(3)(a)), then consideration of contributions (s 79(4)) and current/future circumstances (s 79(5)), and the just and equitable requirement (s 79(2)).
• s 114UB (costs framework in parenting appeal context).

Federal Circuit and Family Court of Australia Act 2021 (Cth)

• s 36 (re-exercise of discretion on appeal).

Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)

• r 13.23 (Summary of Argument must map each ground to submissions and authorities; factual challenges must be properly particularised).

📌 Precedents Relied On

Appeals / discretionary error

• House v The King (error principle) and Gronow v Gronow (weight is for the trial judge).

Procedural fairness and reasons

• Stead v SGIC (materiality of procedural unfairness).
• Authorities emphasising adequate reasons/visible justice were applied in finding miscarriage (e.g., the reasons must show how material matters were weighed).

The “add backs” line of authority (and why it needed re-anchoring after amendments)

• Omacini & Omacini (historic add-back categories), Bevan & Bevan, Vass & Vass, Trevi & Trevi, and Stanford (existing property interests focus).

Statutory interpretation

• Project Blue Sky (text/context approach; single clear meaning where possible).

🧠 Analysis

Issue

Whether, after the 10 June 2025 amendments to s 79, a court can still “solve” spending/dissipation by adding back notional sums as if they are current assets in the balance sheet—and, in this case, whether the trial judge’s approach produced appealable error and required a re-exercise.

Rule

1. s 79(3)(a)(i) now mandates a balance sheet of existing legal and equitable interests. If an item no longer exists, it is not property that can be identified and divided in the balance sheet.
2. The historic “add-back categories” remain relevant, but only as facts to be weighed:

• as part of contribution history under s 79(4) (including contributions to acquisition/conservation/improvement even if the property later ceased to exist), and/or
• as part of current/future circumstances under s 79(5) (including wastage, financial impact, litigation funding, etc), in a holistic justice-and-equity assessment.

1. Procedural fairness: if parties reasonably proceed on a shared premise (e.g., that add backs form part of the pool being assessed) and the judge silently adopts a different basis, that can be a material denial of fairness, especially where it drastically alters the pool and the percentage/adjustment arguments.

Application

• Why the trial decision failed: The Court accepted that the parties’ understanding at trial was that the “pool” included substantial notional amounts, but the reasons ultimately assessed only existing assets—creating a “pool distortion” of about 50% between what the parties thought was being assessed and what was actually assessed. That mattered because contribution percentages and adjustments are anchored to the identified pool, and the mother (unrepresented on the last day) was denied a fair chance to address the “no add backs” approach.
• Why the case becomes a precedent (the big legal move): On re-exercise, the Court confronted the amended s 79(3) head-on. It rejected the argument that the amendments “codified” the old discretion to list notional property as balance-sheet assets, noting the explanatory materials were silent on add backs and the statute’s words were clear: identify only existing property.
• What replaces add-back arithmetic: The Court made the modern pathway explicit: the old Omacini categories are not “assets”; they are facts to be weighed within s 79(4) and/or s 79(5). The Court then removed notional items from the balance sheet and treated their historical receipt/spending (including legal fees and living expenses) as part of the contribution and adjustment narrative, not as an artificial pool expansion.

Conclusion

The appeal was allowed in part: parenting appeal dismissed; property appeal allowed; Orders 40 and 41 set aside; and discretion re-exercised resulting in a payment of $115,262.50 to the mother and agreed sharing of the Centrelink debt, with costs certificates ordered for the property appeal.

⭐ Why This Case Is Significant Enough to Become a Precedent

This decision matters because it changes the day-to-day mechanics of property settlements under the post-10 June 2025 s 79:

1. It answers the “add-backs after the amendments” question directly. The Court says: if the property doesn’t exist at assessment, it cannot be identified in the s 79 balance sheet as property for division.
2. It forces a new style of submissions and reasons. Parties now need:

• an “existing assets/liabilities” balance sheet, and
• a separate, evidence-based account of disposed funds (legal fees, interim distributions, wastage) tied expressly to s 79(4) and/or s 79(5) reasoning—rather than a spreadsheet “add-back” column.

1. It strengthens procedural fairness expectations in pool identification. If the Court is going to run “existing assets only” (or any other approach that differs from the parties’ premise), it must be surfaced so parties can address it—especially where the pool size swings dramatically.
2. It’s an appellate “bridge” case for the new regime. Even though the trial pre-dated commencement, the Court re-exercised discretion with the law as it stood at the appeal, making this one of the earliest appellate guides on how amended s 79 actually operates in practice.