Divorce can impact your property arrangements. It can get especially complicated when another party tries to reduce assets that should have existed in the property pool. Perhaps they had previously owned a pricey car and purposely sold it for less? Or similarly, spent their money on an expensive holiday? In these cases, it's important to understand "What are add backs". Here, our Family Law team explains it in more detail.

What are add backs anyway?

Add backs are an alteration of property interests under the Family Law Act 1975. In cases in which one party has disposed of or distributed assets prior to final settlement, the value of these assets are ‘added back’ to the current value of the property pool. Essentially, they are a sum of money that the Court adds back to the property pool for the purposes of property settlement. For this reason, they are an important consideration in Family Law.

Which assets are commonly added back?

Assets which are typically ‘added back’ caninclude a number of types. For example, a. withdrawn and spent bank funds;b. assets sold for below market value;c. assets transferred or given to family or friends;d. funds gambled or spent on poor investments. Additionally, there is no limit to add-backs categories.  Furthermore, they can extend to any asset. However, whilst add backs may seem like a good idea, in practice they are complex and sometimes costly to establish. Because of this, Courts typically consider the use of add backs as an "exception rather than the rule".

What does the Family Law Act say about add backs?

As add backs are an alteration of property interests under section 79 of the Family Law Act 1975, parties must convince the Court that “adding back” an asset allows a “just and equitable” division of assets. Ultimately, the Court must determine any presently existing legal or equitable rights of the parties and then any alteration of interests rests upon the law, not judicial discretion. Thus, even in matters in which wastage has occurred or assets should be added back there is noassumption or assurance that an add back will be granted and property interests altered by the Court.

Add backs alternatives?

There are other options that Courts can take however, so that add backs are not an issue. These include: Firstly, partial property settlements;Secondly, injunctions upon the sale or purchase of assets to stop wastage; andThirdly, mortgage or bank account freezing so that withdrawals cannot occur.

New South Lawyers’ communications are intended to provide commentary and general information and not relied upon as legal advice. Seek formal legal advice in particular transactions or on matters of interest arising from this communication.

To find out more, chat with a member of New South Lawyers' Family Law Team today.