Shinohara Isn’t a Magic Wand: Full Court Confirms “Add-Backs” Still Apply in Pre-Amendment Cases — and Unproven ATO Debts Stay With the Taxpayer

In Koroma & Ishak [2026] FedCFamC1A 18 (Aldridge, Jarrett & Schonell JJ, 4 March 2026), the Full Court dismissed a property appeal that tried to weaponise Shinohara & Shinohara to undo an orthodox “add-back” approach taken under the pre–Family Law Amendment Act 2024 regime. The decision is significant as precedent because it draws a clear transitional line: Shinohara’s post-amendment s 79 reasoning about notional property has no application to cases governed by the earlier legislative framework, and the long-standing add-back authorities remain binding unless and until properly overruled. The Court also gave a practical evidentiary warning: post-separation ATO liabilities won’t be brought into the pool without evidence explaining how they arose and where the money went.

🧩 Facts and Issues

Facts: The parties are both medical professionals, married in 2003, with five children. They separated under one roof around mid-2020 and divorced in 2021. The wife commenced property proceedings in 2021 (later also parenting, though parenting was not appealed). At trial, a balance sheet (Exhibit 1(v4)) recorded agreed and disputed items, including a contentious “ADDBACKS” section. The primary judge found the husband had transferred very large sums (over $3.4m) to related parties / overseas accounts / associates, rejected his explanations, found him an unsatisfactory witness, and treated those sums as “add-backs” (in substance: value that ought to have been available for division but was unilaterally dealt with). The primary judge assessed net assets at about $22.67m, found contributions equal, then adjusted 2.5% in the wife’s favour (52.5/47.5), resulting in a payment to the wife of about $1.87m, plus superannuation split.

Issues:

1. Shinohara / procedural fairness: Did the primary judge err by not inviting post-hearing submissions about Shinohara & Shinohara?
2. “Add-backs” legality: Did the primary judge err in notionally adding back large sums to the pool?
3. Reasons / factual error: Were the findings about the husband’s control/access to the transferred funds inadequately reasoned or plainly wrong?
4. ATO liability: Did the primary judge err by excluding the husband’s post-separation ATO liability (~$1.026m) from the balance sheet?

⚖️ Applicable Law – Legislation, Regulations, Rules

Family Law Act 1975 (Cth)

• s 79 (property adjustment framework).

Family Law Amendment Act 2024 (Cth)

• Sch 1, Pt 1 (amendments to s 79; central to the “does Shinohara apply?” question).

Professional conduct rules (raised in passing on whether a judge must invite submissions about new authority)

• Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015 (NSW) rr 19.6, 19.8
• Legal Profession Uniform Conduct (Barristers) Rules 2015 (NSW) rr 29, 31

📌 Precedents Relied On

• Shinohara & Shinohara (2025) FLC 94-266; [2025] FedCFamC1A 126 — explained, but held inapplicable to the pre-amendment legislative framework in this case (critical “transitional” point).
• Omacini and Omacini, Townsend and Townsend, Vass v Vass, Trevi & Trevi — key “add-back” authorities validating orthodox treatment (pre-amendment).
• Stanford v Stanford; Bevan & Bevan — “just and equitable” and property approach context.
• House v The King — appellate intervention in discretionary decisions.
• Nguyen v Nguyen — why an intermediate appellate court should only depart from earlier decisions cautiously and when compelled.
• Commissioner of Taxation & Worsnop — treatment of tax liabilities (and why evidence of benefit / penalties/interest matters).
• Bilson & Geer (Costs) — used when fixing appeal costs (and cutting down an “exorbitant” costs schedule).

🧠 Analysis

Issue

Could the husband set aside the property orders by arguing that Shinohara required a different treatment of add-backs (and that the primary judge should have invited submissions about it), and by insisting his ATO debt should reduce the pool?

Rule

1. Transitional application of Shinohara: What Shinohara says about amended s 79 (including that notional property “does not exist” and therefore cannot be included as a balance sheet item under the amended regime) only applies to cases to which the amendments apply. It does not automatically rewrite the pre-amendment s 79 framework.
2. Pre-amendment add-backs remain orthodox: Under the earlier authorities (Omacini/Townsend/Vass/Trevi), courts could treat dissipated or unilaterally applied sums as “add-backs” as part of the reasoning process to achieve a just and equitable outcome.
3. Overruling earlier authority is exceptional: As an intermediate appellate court, the Full Court should only depart from earlier decisions cautiously and when compelled they are wrong (Nguyen v Nguyen).
4. Liabilities require proof: A claimed post-separation tax liability is not automatically pooled—there must be evidence showing how it arose, and (critically) where the funds went that should have been paid to the ATO; otherwise the court may leave the liability with the taxpayer spouse.

Application

• Shinohara point failed at the threshold: The husband’s “judge should have invited submissions about Shinohara” argument collapsed because Shinohara’s amended-s 79 ratio simply did not apply on the facts and legislative setting of this case. So even if (hypothetically) a judge sometimes invites submissions about new authority, it did not matter here.
• Attempt to use Shinohara to claim add-backs were never permissible was rejected: The husband effectively argued the Court should treat Shinohara as showing the pre-amendment add-back line was wrong. The Full Court refused: Shinohara did not expressly overrule Omacini/Townsend/Vass/Trevi, and the Court was not compelled to conclude those decisions were wrong (Nguyen v Nguyen). Result: the primary judge’s approach was “entirely orthodox and consistent with existing principle.”
• Factual/reasons challenges went nowhere because credibility findings were not attacked: The primary judge rejected the husband’s explanations for the transfers and found he remained in control of the funds; those credibility findings (husband, sister, friend) were not successfully challenged. Given the undisputed fact of the transfers plus rejected explanations, the conclusion that the husband still had control/access was reasonably open and adequately explained.
• ATO debt excluded because it was not proved as a pool liability: The husband tendered an ATO transactions list but did not call his accountant and did not satisfactorily explain how the debt arose or where the money went that should have been paid as tax. The Full Court held Worsnop did not rescue him because the necessary factual foundation (benefit from the income; differentiation between primary tax and penalties/interest) was not established.

Conclusion

The appeal was dismissed. The husband was ordered to pay the wife’s appeal costs, fixed at $53,000 (with the Court describing the claimed schedule as “exorbitant” and applying costs-fixing principles).

⭐ Why This Case Becomes a Significant Precedent

This decision matters well beyond the parties because it becomes a practical “transition map” for property cases straddling the 2024 Amendment reforms:

1. It prevents misapplication of Shinohara to the wrong era of s 79. Lawyers can’t reflexively argue “Shinohara killed add-backs” in every case; you must first identify which legislative regime governs the proceeding.
2. It stabilises the pre-amendment law. By confirming the orthodox add-back approach remains valid under the earlier authorities (and refusing to treat Shinohara as retrospectively invalidating them), the Court protects consistency in thousands of still-running pre-amendment matters.
3. It reinforces the high bar for overruling established family-law property authorities. The Court’s reliance on Nguyen v Nguyen is a warning shot: if you want the Full Court to depart from Omacini/Townsend/Vass/Trevi, you must plead it properly and make a compelling, fully-articulated overruling case—not a side-argument.
4. It sets a clear evidentiary standard for ATO debts in property pools. Simply producing an ATO ledger is not enough; you need a coherent explanation (often accountant evidence) tying the debt to proved income flows and showing what happened to the funds. Otherwise, the court can fairly conclude the taxpayer spouse should bear it alone.
5. It signals realistic appellate costs discipline. Inflated costs schedules may be cut hard, with the Court fixing a “realistic and appropriate” figure.

🧠 Take-Home Lesson

When a party tries to re-run a property trial using a “new big case,” the first question is always: Does that case apply to this legislative regime? Koroma & Ishak locks in the answer for Shinohara: post-amendment s 79 reasoning does not automatically govern pre-amendment cases, and add-backs remain available under orthodox principle—while claimed liabilities like ATO debts must be proved, explained, and traced, not merely asserted.