A is for add-backs – A-Z of Family Law

The world of family law is a sometimes confusing, frustrating and broad world of terminology and concepts. This series attempts to shed some light on the issues put before the Court on a day-to-day basis.

Add-backs are a phrase frequently pressed by lawyers in family law, but exceptionally accepted by the Court. Parties who feel that the property pool of a relationship should be bigger than it otherwise is, due to the other party’s spending, wastage of an asset, hiding of assets, will commonly ask that this missing sum is ‘added back’ to the property pool.

Over the decades of case law available in the family law jurisdiction, the Court has ultimately reached a set of guidelines about what may be considered an add-back, and what won’t be.

The 2024 decision by Judge Murdoch in the Sydney Registry of the Federal Circuit and Family Court of Australia (Division 2) of Essa & Azghar provides a helpful summary of the approach a Court makes when considering a raft of add-back claims.

A few cherry-picked quotes:

· Parties are entitled to reasonably conduct their affairs post separation

· [it is] not the function of the court to conduct an audit of the marriage or the relationship finances

· Notionally “adding back” items to the asset pool is a discretionary exercise which ought to be the exception rather than the rule.

· in cases that are not “exceptional” justice and equity can be achieved, not by adding back, but by the exercise of a different discretion, usually by taking up the same as a relevant s 75(2) factor

Judge Murdoch identified key decisions (AJO & GRO, Kowaliw, Trevi) that provide useful guidelines, noting that there are three clear categories:

1. Where legal fees have been paid;

2. Where there has been a premature distribution of assets;

3. Where there has been a waste or recklessness of assets

On the facts of the case, the following add-backs were put forward:

• By the husband, of a total sum of $96,000 transferred from the wife to her daughter from a previous relationship.
• By the wife, of a sum of $112,842 which she believed had been transferred out of the relationship assets by the husband around 8 years before separation.
• By the wife, of a sum of $75,711 that reflected a shareholding in a company that the husband had 12 years before separation, which no longer existed.
• By the wife, of the sums of $49,814 and $84,953 which she believed the husband had not accounted for nor disclosed

Judge Murdoch ultimately found that the wife had not proven sufficiently that these sums of money had not been utilised. The wife also had not shown a valid reason why the shareholding should be added back in, given the evidence, or lack thereof, on hand as to value, the circumstances, and the lengthy time.

However, the husband was successful in having the $96,000 sum added back into the property pool as Judge Murdoch was satisfied on the evidence that the transaction was a premature distribution. This sum was thereafter recorded on the balance sheet as an asset that the wife would be retaining.

Looking ahead, when faced with similar occurrences during or after a relationship, there are two main approaches a Court will consider:

• As an add-back; or
• As a matter to be considered under section 75(2)(o): any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account.

Parties and practitioners should consider whether the circumstances reflect an add-back, with reference to the three categories above, or whether the argument is best suited to be an adjustment under section 75(2)(o).

Finally, it is notable that changes to the Act post 10 June 2025 will affect how add-backs are assessed by the Court. Watch this space as judgements come to light in the coming months.