Post-separation spending sprees and the Family Court in 2025

For decades, if you were going through a separation, there was a well-known, if sometimes frustrating, rule of thumb. If your ex-partner went on a spending spree right after you split up, say, buying a ridiculously expensive sports car or gambling away a chunk of your joint savings, the Family Court could often step in and say, "Not so fast."

Lawyers called this an "add back." Imagine your total property pool was like a pizza to be divided. If your ex ate a slice before you both sat down to divide it, the court would often pretend that slice was still there, adding its value back to the pizza before deciding who got what. This meant the wasteful spender would get less of the actual remaining pizza to make up for the slice they already took.

It seemed fair, right? It was the court’s way of ensuring one person couldn't just burn through cash to spitefully leave less for the other.

But as of 23 July 2025, that has all changed. A groundbreaking decision from the Full Court of the Federal Circuit and Family Court of Australia has rewritten the rulebook. In a case called Shinohara & Shinohara, the court declared that the long-standing practice of "adding back" notional assets is over.

So, what does this mean for you? Does it give a green light to reckless spending post-separation? Not quite. The court still has powerful ways to ensure a fair outcome, but the method has fundamentally shifted.

What Did the Court Actually Say in Shinohara?

The Shinohara decision was the first major interpretation of property division principles following the new Family Law Amendment Act 2024. The court's message was direct: when we sit down to divide the property, the very first step is to figure out what you actually own right now.

In legal terms, the court will only identify and value the existing assets, liabilities, and superannuation that both parties hold at that moment. They will no longer create a "notional" asset pool by adding back money that has already been spent and no longer exists.

The court's reasoning is based on common sense. You can’t divide something that isn’t there. Pretending a pile of money exists when it's already been spent on a trip to Vegas or handed over to a car dealership became legally complicated and, in the court's view, incorrect.

So, the "add back"—the legal fiction of pretending the slice of pizza was still in the box—is gone. The court will only look at the pizza that's left.

This might sound alarming. If your ex-partner drained a joint bank account, does that mean the money is just gone and you're out of luck? The answer is a definitive no. The court has simply changed how it deals with that behaviour.

The New Approach: It’s Not What You Have, but What You Did

Instead of adding back the wasted money at the start of the process, the court now considers that spending at a later, and arguably more important, stage of the property settlement process. The focus has shifted from the asset to the action.

Here’s how it works. After identifying the real, existing property pool, the court moves on to assess the contributions each person made during the relationship. This is where the magic now happens.

1. Assessing Contributions (The Look-Back)

Contributions aren't just about who earned the money. They include who raised the children, who did the housework, and who supported the other's career. The court looks at the whole picture to decide what percentage split of the assets is fair based on what each person put in.

Under the new Shinohara principles, significantly wasting money is now treated as a negative contribution.

Think of it like this: if one person spent their time and energy building up the family's wealth (a positive contribution), the other person, by recklessly spending a large sum of that wealth, has actively worked against that effort. They've made a negative contribution.

So, if your ex-partner took $50,000 from a joint account and lost it gambling, the court won't add that $50,000 back to the pool. Instead, when it comes time to decide the percentages, the court might say, "The contributions are not equal. One person built things up, and the other recklessly knocked a bit down." As a result, they might adjust the final split of the remaining assets in your favour. For example, instead of a 50/50 split, you might get 60/40 to account for the financial damage caused by the other's actions.

2. Considering Future Needs (The Look-Forward)

The final step in the process involves looking at each person's future. The court considers things like who will be caring for the children, each person's age, health, and income-earning capacity.

The wastage of assets can also play a huge role here. If your ex-partner's spending spree has left the family with significantly fewer assets to live on, this directly impacts your financial future. You now have a smaller nest egg to rely on because of their actions.

The court can make a further adjustment to the percentage split to account for this. It acknowledges that you have a greater need for a larger share of the remaining property because the overall pool has been unfairly diminished by the other person's conduct.

What Does This Mean for You in Practical Terms?

This landmark shift has real-world consequences for anyone going through a separation.

• Full Financial Disclosure is More Important Than Ever: Since the focus is on conduct, having a crystal-clear paper trail is vital. You and your lawyer need to meticulously trace what money was spent, when it was spent, and what it was spent on. Bank statements, credit card bills, and loan applications are your best friends.

  
  

• You Can't Ignore Wasteful Spending: Don't panic and think that because "add backs" are gone, bad behaviour gets a free pass. It absolutely does not. You just need to frame the argument differently, focusing on negative contributions and future needs.

  
  

• Act Quickly If You Suspect Foul Play: If you believe your ex-partner is about to go on a spending spree, you need to act fast. Your lawyer can seek urgent court orders to freeze bank accounts or prevent the sale of property. This is now the most effective way to preserve assets, rather than trying to claw them back notionally later on.

  
  

• The Outcome Can Still Be Fair: The goal of the Family Court has always been to achieve a "just and equitable" outcome. The Shinohara decision doesn't change that goal; it just refines the legal pathway to get there. By treating wastage as a "negative contribution," the court can still arrive at a final division that feels fair and properly compensates the person who was financially disadvantaged.

  
  

The end of the "add back" era is a significant change, and while it brings the law into stricter alignment with financial reality, it’s not without its complications. The Shinohara decision forces the legal process to deal only with the assets you actually have, but in doing so, it removes a straightforward and practical tool that lawyers and judges have used for years to calculate a fair outcome. While legally imperfect, the "add-back" provided a clear mathematical path to account for missing funds.

This shift also casts a shadow over the future of partial property settlements. Historically, "add-backs" were a useful mechanism that allowed one party to receive a portion of the asset pool early—perhaps to pay for legal fees or secure a rental property—with the clear understanding that this amount would be "added back" to the total pool in the final calculation. The status of such practical arrangements is now less certain.

Ultimately, while getting rid of "add-backs" makes sense from a purely legal standpoint, it sacrifices a useful, practical tool for a more complex and less direct method of achieving fairness. Reckless financial behaviour is still brought to account through adjustments for contributions and future needs, but the new path is arguably more convoluted. This change ensures that justice is still possible, but it underscores, now more than ever, the critical need for expert guidance to navigate the new complexities and protect your financial future.