With the June 2025 Amendments To the Family Law Act, 1975 (Cth)) [1]
The Family Court [2] has the power to adjust and distribute the property which each party is entitled to in family law matters. The power is granted by the relevant sections of the Family Law Act, 1975 (Cth) (“the Act”). Similar powers are granted by the Act in relation to family law matters involving married and de facto couples [3]
Over the last twenty years, the Full Court of the Family Court has developed and fine-tuned a method to determine the appropriate adjustment of property in a family law matter when applying its powers under the Act, it is known as “the four-steps approach” . [4]
At the same time, when dealing with specific matters before them, the Courts developed concepts and approaches to implement the four-steps approach. These decisions became precedents which other Courts followed in subsequent cases.
In June 2025, significant amendments to the Act came into effect which affect “the four-steps approach” to some extent.
The June 2025 Amendments to the Act
The June 2025 amendments largely “codify” the concepts and approaches developed by the Courts over the years . In other words, the June 2025 amendments now largely repeat those concepts and approaches in the relevant sections of the Act itself. [5]
In addition, however, the June 2025 amendments have introduced new considerations altogether and they have imposed a greater emphasis, for example, on the effect of family violence and its relevance to family law property cases.
The June 2025 amendments do not do away with the four-steps approach which remains an important guide about how the Courts approach family law property matters.
___________________________________
In this article:
Step Four – Fair and Equitable Outcome.
The June 2025 Amendments as they affect the “four-steps approach”.
One of the four stages may acquire substantial prominence.
The Family Law Act gives the Court the power to decide how to divide parties’ assets in a family law matter considering:
- the contribution each party made to the relationship and
- each party’s “future circumstances.”
When it is not fair and equitable to make a property settlement at all
Sometimes, the Court comes to the view that there should not be an adjustment of property at all if it is not satisfied that in all the circumstances, it is just and equitable to make orders to distribute assets between parties. [6]
The Four-Steps Approach
Step One – “The Pool”
Identifying the pool to be divided between the parties – the assets, liabilities and financial resources including the value of the pool. For example: Assets owned or located in Australia and overseas such as:
- a house and/ or an investment property
- cars
- money in a bank accounts and cryptocurrency
- superannuation from both parties
- debts such as credit card debt, a loan, mortgage, tax debt
- money that is owed to you
- shares
- collections (e.g. jewellery, stamps, records, memorabilia, military honours)
- animals including pets and animals that are part of a business (e.g. livestock)
- furniture, vehicles and personal
- companies
- money in trusts and
- gifts, inheritances etc
Also, identifying the financial resources such as each party’s accumulated superannuation entitlements.
Step Two – “Contributions”
An assessment of the contributions which each party made to the relationship both financial and non-financial and to determine their contributions as a percentage. The assessment will include contributions which third parties, such as parents, may have made “on behalf of” one of the parties.
Step Three – “Future Needs”
The financial circumstances of each party into the future – it is necessary to compare the parties’ current and future financial circumstances to ascertain if there should be an adjustment in favour of one as against the other considering their respective circumstances
Step Four – Fair and Equitable Outcome
The overall outcome must be fair and equitable. The Court will not accept a settlement which the parties may reach by consent if it concludes that it is not fair and equitable.
In every family law property matter it is important to use the “four-steps approach” as a guide including to negotiate a settlement. It is a useful tool in preparation to attend mediation.
The June 2025 Amendments as they affect the “four-steps approach”
Family Violence
The June 2025 amendments to the Family Law Act now name family violence as an important consideration in the list of matters to be considered both regarding include a new specific consideration which affect regarding Step Two (contributions) of the four-steps-approach and Step Three (future needs).
The Courts are required to consider how family violence perpetrated by one party to the other party during the relationship affected the victim’s capacity to contribute to the relationship and the effect on the victim’s current and future circumstances.
In other words, the victim may receive an adjustment in his/her favour, a loading, in Step Two (contributions) and Step Three (future needs) in appropriate cases.
For some years, long before the 2025 amendments came into effect, the Courts have ruled in some family law cases that victims of domestic violence may be entitled to a greater share of the divisible assets.[7] However, the Courts’ approach to the issue has been the subject of criticism over time for not giving the issue the appropriate weight that it deserves. [8]
New section 4AC of the Family Law Act includes a lengthy expanded definition of what is family violence which goes beyond acts of violence or threat of violence and includes stalking, repeated derogatory taunts, intentionally damaging or destroying property, intentionally causing death or injury to an animal, economic or financial abuse, preventing the family member from making or keeping connections with his or her family, friends or culture, unreasonably denying the family member financial autonomy, secretly accumulating debt and so on. [9]
The new emphasis on the issue of family violence in family law property matters is welcomed.
“Add-backs” of assets which no longer exist
In cases where assets of the relationship, such as funds in a bank account, no longer exist because one party wasted the funds unjustifiably as for example, say, $200,000 in gambling, the Courts developed the concept of “add-backs” and would in some cases notionally add back such assets to Step One, that is, to the pool to be divided between the parties.
When making its decision about the appropriate division of assets, the Court would then assume that the party who wasted the funds already had received the $200,000.
The concept of “add-backs” has been controversial over the years. Some authorities would not place “add-backs in Stage One but in Stage Three (future needs). [10]
In a very recent Full Court decision in Shinohara [2025] FedCFamC1A 126 (23 July 2025) the Court decided that the June 2025 amendments mean that add-backs can no longer be included in the pool at Stage One. The relevant sections read:
(3) In considering what order (if any) should be made under this section in property settlement proceedings, the court:
(a) is to identify:
(i) the existing legal and equitable rights and interests in any property of the parties to the marriage or either of them…[11]
The Full Court concluded that the section must be interpreted as meaning that only the existing assets must be considered not national assets such as “add backs.” Instead, the Court stated, “add backs” may be considered in appropriate cases maybe in Step Three (future needs) or Step Four (fair and equitable assessment). [12]
The list of matters to be considered by the Court under the Act now also includes the concept of “wastage” which a party may be guilty of having committed but the Full Court decision of Shinohara has interpreted the amended sections to mean that the issue should be addressed and, if necessary, adjustments should be made to compensate the other party, either in Steps Three or Step Four of the Four-Steps Approach.
The new concept of the “companion animal”
The June 2025 amendments introduced other new concepts in the relevant sections of the Act such as considerations about “companion animals”.
A well-recognised form of family violence is when a party mistreats an animal or even has the animal destroyed to whom the other party is close. The perpetrator may keep the animal from the other party against the latter’s wishes as some form of punishment. In the past, decisions about who kept the animal would depend on the name on the registration papers relating to the animal which may or may not have represented the true relationship of the animal to the other party and to children.
The amended Act now list numerous considerations for the Court regarding who keeps the companion animal, and the registered ownership of the dog is no longer the primary consideration.
One of the four stages may acquire substantial prominence
Once each party is fully informed about the finances it is important to apply the “four-steps approach” to their case as part of the preparation for negotiations to attempt to settle the property matter. Depending on the facts and the complexity of a particular case, anyone of the four stages may acquire substantial prominence. Below are some examples.
Example: The parties may dispute the value of an asset or assets in Step One.
- Expert valuers may disagree and be required to meet to issue a joint statement about their disagreement.
- Ultimately, the dispute about valuations may need to be decided by a judge at the final hearing.
Example: A party may fail to disclose an asset in Step One
- Failure to disclose may have dire consequences for the party at fault.
- Such failure may also lead to the reopening of the case in future
Example: In relation to Step Two regarding contributions:
- When a party owned an asset in the pool before meeting the other party.
- When a party received\s an inheritance late in the marriage or relationship.
Example: In relation to Step Three regarding the parties ‘current and future circumstances
Superannuation pool
In the majority of cases, the parties’ combined superannuation entitlements are split equally by the Courts by making superannuation splitting orders to that effect.
The non-superannuation pool
The “four-steps approach” normally applies to the non-superannuation pool.
Scenario
An example of how the “four-steps approach” is applied could involve:
- The Court concludes that Party A made the greater contribution because he applied an inheritance, he received three years ago to pay off the mortgage. Under Step Two about contributions, he may be assessed to have made greater contributions, say, fifty-five per cent (55%).
- Party B has the care of three children under the age of 18 years, only recently returned to work after caring for children at home for ten years and there is a substantial salary disparity between Party A and Party B.
- Under Step Three the Court’s conclusion may be that she is entitled to a ten per cent (10%) adjustment in her favour to make it fair and equitable pursuant to .
- The overall adjustment, therefore, will be 55% in favour of Party B.
_________________
[1] https://www.ag.gov.au/families-and-marriage/publications/family-law-changes-june-2025-information-family-law-professionals
[2] The Court’s full name is Federal Circuit and Family Court of Australia (FCFCOA).
[3] See s79 and s90SM of the Family Law Act
[4] See such Full Court decisions as Ferraro [1992] FamCA 64 from [159]; Hickey [2003] FamCA 395 at [39]; and AJO & GRO (Omacini) [2005] FamCA 195 at [46].
[5] See s79 and s90SM of the Family Law Act
[6] Sections section s79(2) and s90SM(2) of the Family Law Act, 1975 (Cth). See also STANFORD v STANFORD (P23/2012).
[7] See Kennon [1997] FamCA 27. Also, Benson & Drury [2020] FamCAFC 303 at [35]; Kozovska & Kozovski [2009] FMCAfam 1014 at [73]- [74; Kucera[2009] FMCAfam; Dixon [2011] FMCAfam1244; Martell [2023] FedCFamC1A 71 at [23]-[37].
[8] https://www.abc.net.au/news/2023-09-17/domestic-violence-victims-family-law-act-dv/102867340
[9] https://www.austlii.edu.au/cgi-bin/viewdoc/au/legis/cth/consol_act/fla1975114/s4ab.html#
[10] See Trevi & Trevi [2018] FamCAFC 173
[11] See s79(3)(a)(i) and s90SM(3)(a)(i) of the Family Law Act
[12] The Honourable Garry Watts AM. in a piece critical of the decision of the Full Court in Shinohara, points out that the word “only” does not appear in the sections amended by the June 2025 amendments. LEAP Family Law video “Struggling with Shinohara.”
[13] See s79(5)(p) and s90SM(5)(p).
