“Addbacks” Clarified in Property Settlements: What you Need to Know

A recent decision of the Full Court of the Federal Circuit and Family Court of Australia in Voight & Zunino has provided important guidance about how courts treat money spent before a final property settlement, particularly when one party argues that it should be “added back” into the asset pool.

If you’re going through a separation, especially in a case involving significant assets or legal fees, this decision is highly relevant.

What is an “Addback”?

At the centre of this issue is the concept of an “addback”. An addback is when the Court treats money that has already been spent as if it were still part of the property pool.

For example, this arises when one party says, “My former partner used joint funds after separation.” The argument is that the spent money should be notionally “added back” into the total asset pool before dividing it.

In Shinohara & Shinohara, the Court made it clear that courts must focus on actual existing property, not hypothetical or notional assets. Money that has been spent is generally no longer property.

What Happened in Voight & Zunino?

The decision in Voight & Zunino build on this shift and shows. In this case, the parties were in a long de facto relationship involving a large farming enterprise worth nearly $19 million.

During the proceedings, the respondent paid the applicant $300,000 under an interim court order. The order said the payment would be “characterised by the trial judge” later, meaning its nature was left unresolved at the time. At the final hearing, the trial judge dismissed the applicant’s claim entirely.

When the matter was decided, the trial judge dismissed the applicant’s claim for any further property adjustment and suggested that the $300,000 payment could be treated as a gift or as “sunk costs.”

On Appeal, the Full Court disagreed and held that the court cannot order someone to pay $300,000 without identifying the legal power that allows it. The Court rejected the idea that the payment could be characterised as a gift, noting that money paid under a court order is not voluntary. The payment was recognised as part of the overall property division between the parties.

Implications

Rather than ignoring the payment or reclassifying it, the Court took it into account as an advance on the applicant’s entitlement. After considering contributions and other relevant factors, the Court ordered that a further amount be paid, resulting in a modest but meaningful adjustment in the applicant’s favour.

While the $300,000 was not “added back” in the traditional sense, the Court accepted that most of this amount had already been spent and is not existing property, yet, then adjusted the parties’ entitlements to account for the earlier receipt of the $300,000. Instead of saying “we addback $300,000,” the court essentially says, “we recognise what remains, and adjust for what has already been received.”

Consistent with Shinohara, courts are no longer willing to treat addbacks as a flexible or discretionary tool to achieve a sense of fairness. The focus is on identifying what property exists at the time of the hearing. Unless there is evidence of intentional or improper depletion of assets, those amounts are unlikely to be “added back” into the asset pool.

If you have any questions about how this may affect your situation, do not hesitate to contact us for legal advice or support.