Introduction
Q1: My spouse moved assets into a family trust before our divorce. Can the court undo that?
A: Yes. Section 106B of the Family Law Act 1975 lets the court reverse any transfer made to dodge a property claim, including moves into a family trust. Reference: Jess & Jess (No 5) [2024] FedCFamC1A 85
Q2: Can the court force a trustee to hand over trust money for my property settlement?
A: Yes, but every affected beneficiary must get a fair hearing first. Part VIIIAA of the Family Law Act lets the court order a trustee to bring forward the vesting date and pay out trust capital straight away. Reference: AC and Ors & VC and Anor [2013] FamCAFC 60
Q3: My spouse already blew through the money. Will the court pretend it still exists?
A: No. Since June 2025, courts no longer add wasted money back into the asset pool on paper. The court only divides property that actually exists, then adjusts the percentage split to account for dissipation. If what remains is too small, even a larger share may not cover what you are owed. Reference: Jakobsson & Jakobsson (No 2) [2025] FedCFamC1A 137
Can Section 106B Undo Asset Transfers Into a Family Trust?
Section 106B of the Family Law Act 1975 is your strongest tool when a spouse tries to hide assets in a trust. It lets the court set aside any transfer, whether it is a share transfer or a new trust deed, if it was made to defeat a property claim.
s 106B comes up most often when one spouse shifts wealth into a web of companies and trusts to frustrate the other. Courts will grant broad discovery orders so you can trace where the money went. You do not need an ownership stake in the trust assets. A pending property claim under s 79 is enough to justify investigating whether assets were moved fraudulently.
"The law should not operate in that manner [denying an alleged victim the ability to prove fraud]. To my way of thinking it is no answer for the [respondents] to advance pointed pleadings technicalities to support their resistance to giving disclosure when the wife is endeavouring to uncover the fraud she asserts was committed..."
If you suspect your spouse shifted assets into a trust, the court will not let the trustee hide behind procedural technicalities. You do not need to prove fraud first. The investigation itself is protected.
The husband owned a retail business through a unit trust. During divorce proceedings, he claimed to have transferred his units to his son under a trust deed he later admitted was fake. After the husband died, the wife applied under s 106B to reverse the transfer so the assets could be divided.
The son and his companies refused to hand over records, arguing their privacy would be breached. They said the wife never owned the units, so she had no right to trace the income they earned since the 2009 transfer.
Outcome: The Full Court dismissed the son's appeal. Because the wife was challenging the transfers as fraud, she had every right to investigate what happened to the assets and the income they produced. Without identifying who received the income, her s 106B claim would be dead in the water.
In practical terms, if you see assets moving before or during divorce proceedings, an urgent s 106B application can stop the transfers and compel full disclosure from all parties involved.
Can You Still Rely on Notional Add-Backs When Trust Assets Are Shielded?
Many people think that once a spouse spends all the money before the final hearing, the court can put it back on the balance sheet as a notional asset. Before June 2025, that was true. Not anymore.
The Family Law Amendment Act 2024 took effect on 10 June 2025. New s 79(3)(a)(i) requires the court to identify only property that actually exists at the time of trial. Spent money cannot appear on the balance sheet as a notional asset. The add-back methodology is abolished.
Courts now use two replacement tools. First, when assessing contributions under s 79(4), dissipation counts against the party who wasted the money. Second, when assessing current and future needs under s 79(5)(d), the court adjusts the percentage split to account for the waste.
"What might, pre-amendments, have been dealt with as an addback, is now to be addressed in the consideration of the retrospective contributions of the parties at the s 79(4) stage."
This shift matters enormously for trust enforcement. Under the old law, courts could at least inflate the pool on paper to bridge the gap. Now they cannot. Courts can only adjust percentages within the pool of assets that actually exist. If a trust shields the only remaining real assets, even a larger percentage of a depleted pool will not cover what you are owed. Keach & Keach [2011] FamCA 192 exposed this problem under the old law — add-backs were not enough even then. Under the new law, you do not even have that option.
The husband and wife were in a bitter property fight. The husband had blown through a large amount of money. The court found he spent over $191,000 on legal fees and cashed-out shares. Under the old framework, these amounts were added back to the pool on paper. The judge awarded the wife 80%, working out to $773,684.
The husband argued the Junior Trust holding the family home was set up by his father and should stay out of the pool. The wife said the trust was a sham to keep property out of reach.
Outcome: The court ruled the trust was not a sham because the husband's father kept ultimate control. So much of the husband's share was already spent that the real assets fell about $73,000 short of what the wife was owed. The judge could not force the husband to borrow money to cover the gap. Borrowing capacity is not property. Even with add-backs on the books, the wife came up short. Under current law, where add-backs no longer exist, the shortfall would be even harder to bridge.
Notional add-backs no longer exist. You cannot squeeze enough money out of a depleted pool by adjusting percentages alone. Act early and go after the trust directly under s 106B or Part VIIIAA.
Can Part VIIIAA Force a Trustee to Pay a Divorce Settlement?
Part VIIIAA of the Family Law Act gives courts the power to make orders that affect third parties, including family trust trustees. Under s 90AE, the court can:
- Tell the trustee to do something with a spouse's property
- Change a third party's rights or obligations connected to the marriage
But the power has limits. The order must be reasonably necessary to achieve the property split between spouses.
"Whatever may be the outer limits of the powers in Part VIIIAA, we are satisfied the Part can be used to require a trustee... to bring forward the vesting date of a trust fund for... distributing that share to the party entitled, and that these powers can be exercised even at the expense of third party interests..."
This confirmed courts can break open a trust by bringing forward its vesting date. But only if the right procedures are followed and every affected party gets a hearing.
Both husband and wife were beneficiaries of a trust set up by the husband's father. With no Appointor or Guardian in office, the trial judge found the beneficiaries had a fixed right to the trust capital when it vested. To fund the wife's property settlement, the judge ordered the trustee to bring forward the vesting date from 2064 to 2010 and pay out the funds straight away.
The husband's mother controlled the trustee company. She appealed, arguing the court was creating property out of thin air and trampling the rights of beneficiaries who had nothing to do with the marriage.
Outcome: The Full Court agreed that Part VIIIAA does let a judge order early vesting. But it threw out the specific orders because the trial judge denied the husband's mother a fair hearing. The judge had ordered a $338,000 payment to the mother for her lost future interest. Nobody had asked for or discussed that payment during the trial.
Courts can order a trustee to accelerate distributions. But every affected party, including the trustee and other beneficiaries, must have their day in court. Skip this step and your enforcement order can be thrown out.
Does Controlling a Family Trust Make Its Assets Divisible Property?
Whether trust assets count as property (the court can divide them directly) or a financial resource (the court can only use them to adjust the split of other assets) is the key hurdle in trust enforcement.
If a trust was set up to protect a family business across generations, the court is unlikely to treat it as one spouse's personal property. Even if that spouse has significant control.
"If the husband exercised his powers for the purpose of benefiting the wife whether directly or indirectly, even if not the dominant purpose, he would be in breach of the proper purpose rule... To do so would diminish the trusts' assets and... unjustly depriving future generations of his father's descendants of the benefits which the husband's father intended to confer upon them."
A trustee's duty to the trust can override a spouse's claim. You cannot raid a trust set up for genuine intergenerational purposes just to fund a divorce settlement.
The wife asked the court to declare that assets in four discretionary trusts were the husband's property. These trusts ran a family retail business that started in the early 1900s. The husband could remove other trustees and directors, which the wife said made him the de facto owner.
The husband admitted the trusts were a financial resource but not property. He said his father set them up to keep the business in the Caldwell family for future generations. Using trust funds to pay a divorce settlement would breach the proper purpose rule of the trust deed.
Outcome: The court dismissed the wife's application. Justice Carew found the husband's control was limited by his duty to act in line with the trust's purpose. The assets were built up over four generations of the Caldwell family, not through the couple's efforts during the marriage. They could not be treated as marital property.
Even if your spouse can technically write cheques from the trust account, that alone does not make the trust assets marital property. The trust's origin, purpose, and structure all matter.
Trust Enforcement Outcomes Compared
| Comparison | Jess & Jess (No 5) [2024] | AC and Ors & VC and Anor [2013] | Caldwell & Caldwell [2025] | Keach & Keach and Ors [2011] |
|---|---|---|---|---|
| Enforcement mechanism | s 106B (set aside fraud) | Part VIIIAA (early vesting) | Property declaration | Sham trust argument |
| Trust asset treatment | Succeeded | Succeeded in principle | Failed | Failed |
| Reason for outcome | Transaction was a fraudulent attempt to defeat a claim | Beneficiaries had fixed entitlements; early vesting permitted | Intergenerational family business trust; not a sham | Assets originated from the father; husband lacked absolute control |
| Decisive factor | Fraud and dishonesty in the transfer | Fixed and irrevocable beneficial interest | Trust purpose and fiduciary duty | Third-party origin of trust assets |
Decisive factor: The outcomes turned on two questions. Was the transfer fraudulent? Were the entitlements fixed? Where the trust served a genuine intergenerational purpose and the spouse lacked absolute control, enforcement claims failed. It did not matter how much control the spouse appeared to have.
What Should You Do If Your Spouse Has Wasted Assets Before Divorce?
Here are the key lessons from the cases in this article:
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Act early with a s 106B injunction. Jess & Jess (No 5) showed that courts will allow discovery to uncover fraud even early in proceedings. If you see assets moving, do not wait for the final trial.
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Notional add-backs are abolished. Since June 2025, courts no longer inflate the asset pool with spent money. Keach & Keach showed that even under the old law, add-backs were not enough when trust assets were out of reach. Under current law, you do not even have that option. Go after the trust directly.
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Join third parties correctly. AC and Ors & VC and Anor confirmed that Part VIIIAA can compel early vesting, but only if every affected beneficiary gets a fair hearing. If you do not join the trustee and other beneficiaries, your enforcement order can be thrown out.
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Distinguish property from financial resource. Caldwell & Caldwell showed that intergenerational trusts with genuine purposes are unlikely to be treated as property. In these cases, argue for a bigger share of the other assets by pointing to the trust as a financial resource, rather than trying to break the trust itself.
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Get expert evidence for trust valuations. If your spouse is a beneficiary of a trust they do not control, you need expert actuarial evidence to value their interest. Without it, the court may strike out your subpoenas (Cristopher & Pelleas [2025] FedCFamC1F 713).
Correct Approach：
- Apply for urgent s 106B injunction as soon as you see assets moving
- Join the trustee and all affected beneficiaries as parties
- Obtain expert actuarial evidence to value trust interests
- Argue the trust is a financial resource when it has genuine intergenerational purpose
- Seek wide-ranging discovery orders to trace dissipated funds
Incorrect Approach：
- Wait until the final trial to raise asset dissipation
- Seek trust orders without notifying affected third parties
- Rely on general assertions about trust value without evidence
- Insist every trust is divisible property regardless of its origin
- Accept the other party's disclosure at face value
