Asset Wastage in Divorce: A Shift from Add-Backs to Adjustment
For decades, Australian family law has recognised “asset wastage”, when one partner intentionally or recklessly depletes the asset pool, usually through actions such as gambling, lavish spending, or neglect. Until recently, courts often dealt with this through what practitioners called add-backs, pretending the wasted money was still in the asset pool. That notional amount would typically be allocated to the person who wasted it, effectively reducing their share. That approach has changed.
We want to clarify the changes, because we have seen some social media content suggesting that there will no longer be add backs for wastage, but failing to explain that it will now be dealt with in a different manner. While it’s true add-back’s are gone, wastage still will be taken into consideration when dividing assets, although the process will be different.
What’s Changed
From June 2025, the Family Law Amendment Act 2024 (Cth) changed our approach to wastage in family law. Wastage is specifically identified in the legislation as something to be taken into consideration when dividing the asset pool. Although it is no longer treated as a notional add-back to the property pool, the court now includes only existing property in the asset pool and then divides it between the parties in a way that takes into account the amount that was wasted, likely through a percentage adjustment. In both approaches, wastage is taken into consideration when dividing assets and can reduce the share of the person who caused it, but the method (and potentially the outcome) will be different.
In practical terms:
The court recognises that the money is gone.
If one party has deliberately or recklessly reduced the pool, their behaviour may lead to a smaller share of what remains.
If losses were accidental, mutual, or minor, the court may decide no adjustment is needed.
This approach replaces mechanical accounting with a focus on fairness and contribution, aligning wastage with other factors the court must weigh when deciding a just and equitable outcome.
As of writing there’s limited case law interpreting the reforms, but practitioners expect courts to apply them in line with the reasoning from Kowaliw v Kowaliw (1981) FLC 91-092 and later cases, with an added emphasis on transparency and proportionality.
The Takeaway
This is an area to keep an eye on, but wastage as a concept still exists in family law, so raise it early with your lawyer if you think it may apply to your situation.
