Wastage and Dissipated Assets After Shinohara: The End of the Notional Add-Back

Wasted assets can still affect how existing property is divided but cannot be notionally added back to the property pool under the amended law. 

For business owners and high-net-worth individuals separating in Victoria, that distinction matters where a spouse has gambled substantial funds or given assets away. Following Shinohara & Shinohara [2025] FedCFamC1A 126, wastage in property settlements in Australia must be addressed through the statutory assessment of the parties’ entitlements. 

Section 79(3)(a)(i) of the Family Law Act 1975 (Cth) requires the court to identify existing legal and equitable property interests. The reforms commencing on 10 June 2025 expressly address material wastage caused intentionally or recklessly under section 79(5)(d). Historical contributions remain relevant under section 79(4), including contributions concerning property that has since been disposed of. 

To establish how the loss should affect the settlement, identifying a substantial withdrawal is only the starting point. The evidence must establish what happened to the funds, how they were used, and why that use should affect the settlement. Intentional or reckless dissipation does not create an automatic entitlement to dollar-for-dollar reimbursement. 

How Does Australian Law Treat Wastage in Property Settlements After Shinohara? 

For married parties in Victoria, the Family Law Act 1975 (Cth), as amended by the Family Law Amendment Act 2024 (Cth), separates identifying property from deciding how it should be divided. Section 79(3)(a)(i) requires identification of existing legal and equitable property interests. Section 79(4) addresses contributions, while section 79(5)(d) addresses the effect of material wastage caused intentionally or recklessly. 

Before the reforms, Omacini & Omacini [2005] FamCA 195 at [30] identified three categories in which courts had considered notional add-backs: expenditure on legal fees, premature distributions of matrimonial assets, and certain forms of wasteful dissipation. These Omacini categories did not make every disputed expense recoverable. An add-back notionally placed spent money on one party’s side of the balance sheet, despite that money no longer being held. 

In Shinohara & Shinohara [2025] FedCFamC1A 126 at [121]–[127], the Full Court held that the amended section 79 permits only existing property to enter the divisible pool. However, the circumstances behind the former add-back categories remain relevant to contributions or current and future circumstances. With notional add-backs abolished under the amended framework, the court must assess the disposal and its consequences through those statutory considerations. 

Historical contributions remain relevant under section 79(4), which expressly recognises contributions concerning property that has since ceased to belong to the parties. This preserves the relevance of past financial and non-financial contributions; it does not automatically turn disputed expenditure into a negative contribution. 

For an allegation of intentional or reckless dissipation, section 79(5)(d) requires consideration of the effect of material wastage of property or financial resources. A disappointing investment outcome alone does not establish that threshold. Nor should legal fees or an interim distribution automatically be labelled wastage: sections 79(5)(n) and 79(5)(v) may instead be relevant. 

Shinohara itself did not establish gambling losses or reckless wastage. At [131(l)], the Court considered the spent funds under section 79(5), expressly declining to treat the mother’s legal expenses as a contribution or negative contribution. 

The argument must therefore identify the applicable statutory factor and explain how the evidence supports an adjustment to the division of existing property. The court must still reach a just and equitable outcome. 

How Do Courts Assess Wastage in Property Settlements After Shinohara? 

Does the disputed property still exist? 

The first question is whether the asset has genuinely been exhausted. Money transferred between accounts or used to acquire another asset has not necessarily disappeared. A substantial withdrawal therefore requires tracing before it can be characterised as wastage. 

Under section 79(3)(a)(i), existing property must be identified through the parties’ legal and equitable interests. For a business owner, a payment involving a company or trust requires particular care: the payment may affect a shareholding, loan account, or another interest. Its treatment depends on ownership and the transaction, not simply who authorised it. 

What evidence establishes intentional or reckless dissipation? 

Section 79(5)(d) wastage requires more than disagreement with a spouse’s financial decisions. The court considers the effect of material wastage caused intentionally or recklessly. Evidence must connect the alleged conduct to the depletion of property or financial resources. 

Bank statements, gambling records, investment documents, and communications about substantial gifts can help establish the amount, timing, and purpose of expenditure. For investment losses, the circumstances of the decision matter. A loss alone does not prove intentional or reckless dissipation, and a spouse’s disapproval does not establish the statutory threshold. 

Should the expenditure be considered through contributions or current circumstances? 

The use of the funds determines how the argument should be framed. Historical contributions can remain relevant even where the property concerned has been sold or consumed. However, money spent solely for one party’s benefit does not automatically qualify as a contribution or negative contribution. 

In Shinohara, the Court examined how each party had applied the proceeds of property sales. It considered the spent funds under section 79(5), including the consequences of the mother’s payment of legal expenses. This requires separating genuine contribution evidence from allegations of wastage and other expenditure affecting current circumstances. 

How does the court avoid counting the same money twice? 

A claim should reconcile the original funds with their eventual use. If sale proceeds were used to buy another asset that is included in the property pool, those funds remain represented by that asset and should not also be counted as money lost or wasted. Omacini identified comparable double-counting concerns. 

The same discipline applies when presenting adjustments. Where one transaction is relevant to several statutory factors, the submissions should explain their relationship so that its financial effect is not duplicated. 

Will proven wastage produce a dollar-for-dollar adjustment? 

An adjustment is not an automatic reimbursement of the amount spent. The court weighs the evidence alongside contributions and the parties’ current and future circumstances to reach a just and equitable outcome. 

A useful claim therefore explains both the loss and its consequences for the remaining settlement. The amount matters, but so do the circumstances of disposal, the use of any proceeds and the evidence supporting the proposed adjustment. 

What Disputes Arise Over Wastage and Dissipated Assets After Shinohara? 

Investment losses often produce disagreement about whether one party should bear the financial consequences. In Omacini & Omacini, the trial judge added back expenditure on shares and investments after accepting that the wife should not bear the husband’s losses. The Full Court identified deficiencies in that reasoning, including the absence of findings that the investment activities were wanton or reckless, apart from a separately discussed vehicle venture. Disapproval of an investment strategy was insufficient to resolve how the losses should be treated. 

A related dispute concerns whether money has disappeared, remains invested or concealed. Omacini exposed the risk of counting sale proceeds alongside assets and legal expenses funded from those proceeds. Assets concealed during the original settlement raise a separate question about reopening final orders. Before settlement, unexplained transfers require further investigation and reconciliation with existing property; they do not, by themselves, establish that wastage has occurred. 

Legal expenses and living costs create a different evidentiary problem. In Shinohara & Shinohara, the father had applied property proceeds towards legal fees and living expenses for himself and the children, but his evidence did not adequately distinguish those uses. The Court identified that deficiency as an obstacle to weighing the expenditure. A total withdrawal figure cannot show how much benefited one party alone, supported the children or served another purpose. 

Substantial gifts and gambling expenditure require similarly precise evidence. The dispute may concern whether a payment was authorised, whether an apparent gift was a loan, or whether gambling transactions caused the alleged net loss. These distinctions affect both the identification of existing property and any allegation of intentional or reckless dissipation. The amount leaving an account is not necessarily the amount wasted. 

With notional add-backs abolished under the amended framework, these disputes cannot be resolved simply by inserting the contested amount into a balance sheet. A party alleging section 79(5)(d) wastage must explain the conduct and its material financial effect. A party responding needs records showing where the money went. In substantial property matters, the quality of that evidence can determine whether the court can assess the claim at all. 

How Should You Prepare or Defend a Wastage Claim After Shinohara? 

Before pursuing section 79(5)(d) wastage, identify the adjustment sought and the evidence needed to justify it. A schedule of disputed transactions should record the source, date, recipient, and purpose of each payment, together with any proceeds or replacement assets. Separate established facts from inferences and identify the records needed to resolve each gap. 

For business owners and directors, personal and corporate transactions require careful separation. Company accounts, loan ledgers, and trust records may explain whether a payment reduced a party’s property interest, discharged a liability, or created a recoverable debt. An accountant’s tracing exercise is most useful when directed to specific disputed transactions and reconciled with the property valuations. 

The legal argument should then distinguish historical contributions from intentional or reckless dissipation and other expenditure relevant to current circumstances. Explain why each statutory factor applies and how the transaction should affect the proposed division. Avoid presenting the same financial consequence as several cumulative adjustments. 

When defending a claim, provide a documented explanation of the expenditure rather than relying solely on the absence of proof from the other party. Evidence of agreed spending, legitimate living expenses or an asset acquired with the funds can materially change the analysis. Shinohara demonstrates the difficulty created when legal fees and family expenditure are not adequately distinguished. 

Finally, compare the evidentiary value of further investigation with its cost and the amount in dispute. Focus settlement proposals on the division of existing property, supported by the strongest provable facts. A large, disputed withdrawal alone does not establish the adjustment the court should make. 

Frequently Asked Questions 

How should you address wastage in a property settlement after Shinohara? 

After Shinohara, a claim about dissipated assets must explain how the expenditure should affect the division of existing property. Historical contributions remain relevant, while intentional or reckless dissipation requires evidence of material wastage and its financial effect. Neither a substantial loss nor disputed spending produces an automatic entitlement to reimbursement. 

For business owners, professionals and high-net-worth individuals in Victoria, the next step is to assess the transactions, the available records, and the appropriate statutory argument. Our team advises on high-net-worth property settlements involving disputed expenditure and complex financial interests. Book a consultation to discuss pursuing or defending a wastage claim. 

This article is general information only and not legal advice. For advice specific to your circumstances, please contact our team.