Dividing assets in a divorce is rarely straightforward, but when one spouse has been burning through money or offloading assets, things can get a whole lot messier.
Maybe it's thousands lost at the casino. Lavish gifts to a new partner. Or secret withdrawals right before separation.
This kind of reckless, wasteful spending is known in Australian family law as wastage, and it can have a big impact on how your property is ultimately divided.
Wastage isn't just poor financial judgment. It's when one party deliberately or carelessly drains the marital pool, leaving the other with less than their fair share.
And in a legal setting, that matters.
While urgent concerns like domestic violence need immediate legal intervention (and our Sydney-based domestic violence lawyers are here for that), financial misconduct like wastage is its own serious issue.
We've seen countless cases where one person's spending spree becomes the central battleground in a property settlement, and often, the biggest source of frustration and injustice.
In this guide, our divorce lawyers at Unified Lawyers unpack everything you need to know about wastage.
What does it actually mean?
How is it different from normal day-to-day spending?
What examples do the courts look for, and what makes a claim succeed or fail?
We'll walk you through real-world scenarios like gambling, asset transfers, and reckless spending post-separation.
You'll learn how to prove wastage, what evidence you'll need, and how courts weigh its effect on the final settlement. We'll also explain why some wastage arguments fall flat, and what you can do to avoid the same outcome.
If you're dealing with a partner who's been careless (or calculated) with shared finances, knowing your rights is the first step.
And if you're gearing up for a property settlement, understanding wastage could make all the difference in protecting what's rightfully yours.
What is wastage in family law?
Wastage in family law refers to one party intentionally, recklessly, or negligently dissipating or reducing the marital asset pool to the detriment of the other party.
In simple terms, it means one spouse squandered assets – either during the marriage or after separation – in a way that significantly depleted the property available for division.
This could involve large sums of money blown on bad decisions (like gambling or risky investments) or assets being sold off or destroyed without good reason.
Australian family courts recognize wastage as a serious factor in property settlements. The Family Law Act 1975 recognises wastage as a consideration that must be taken into account when determining a final property settlement.
This is found at section 79(5)(d) This provision gives the court power to factor in a party's wasteful conduct when deciding what's just and equitable in a property split.
The key case on wasting assets is Kowaliw v Kowaliw (1981).
The court said that if one spouse carelessly or deliberately burns through marital money—think gambling sprees, risky investments, or big cash withdrawals—that loss shouldn't come out of the innocent spouse's share.
When the assets are divided, the judge can "add back" the wasted amount or otherwise adjust the split so the reckless spender, not the other partner, wears the financial hit. Lawyers call this the "wastage" or "negative contribution" rule.
Since 10 June 2025 the Family Law Act has a clear new line : if one partner blows or hides joint money on purpose or through wild spending, the judge must look at that when splitting the assets.
The change tells the court to factor in any "wastage" caused intentionally or recklessly, so the person who wasted the cash wears the loss, not the innocent partner.
In short : big gambling losses, fire-sale deals, or secret gifts can't be swept under the rug anymore, the law now says they directly affect who gets what in a property settlement.
In summary, wastage is more than just overspending.
It's a pattern of destructive financial behaviour by one spouse that significantly drains the couple's wealth, either by design or sheer irresponsibility.
Family law strives to ensure that such conduct doesn't leave the other spouse high and dry when it comes time to divide the marital assets.
Examples of wastage in family law
What does wastage look like in real life? Here are some common examples of wastage in the context of family law property settlements :
1. Gambling away assets :
One spouse incurs significant gambling losses, blowing joint savings or racking up big debts at the casino.
Courts often recognize excessive gambling as a classic form of wastage, especially when the losses are disproportionate to the couple's financial situation.
If tens of thousands of dollars (or more) are lost to a gambling habit, that's a red flag for wastage in a divorce case.
2. Extravagant or luxury spending :
This includes unnecessary or excessive purchases that drain the marital funds.
Examples might be a spouse suddenly splurging on luxury vacations, sports cars, designer goods, or lavish parties without the other's consent or benefit.
If these purchases are far beyond normal living expenses and done when the marriage is breaking down, a court may view them as wastage.
3. Lavish gifts or spending on an affair :
Money spent on an extramarital affair – such as expensive jewelry, apartments, or vacations for a new girlfriend/boyfriend – can be wastage.
Similarly, gifting large sums or assets to friends or extended family without a legitimate reason (especially if done to reduce the asset pool before separation) could be deemed wastage.
For instance, secretly giving away a car or transferring money to a relative for safekeeping can fall in this category.
4. Selling assets below value :
If a spouse sells or transfers a marital asset for far less than its market value (or even gives it away), it's effectively disposing of property to the other party's detriment.
An example might be selling a jointly owned property to a friend for a token amount, or "fire-selling" an investment for quick cash at a fraction of its worth. This kind of asset disposal that deliberately reduces value is classic wastage.
5. Destruction or neglect of property :
Intentionally destroying assets out of spite – like wrecking a car or vandalizing a jointly owned home – is obvious wastage.
But neglect can also count: for example, if one spouse was responsible for maintaining an investment property or family business and willfully neglected it, causing its value to plummet, the court may view that as wastage.
Failing to pay taxes or bills to the point that heavy fines or losses accrue could also fit here.
Running up unnecessary debts: Taking out loans or maxing out credit cards on frivolous expenditures – especially right before or after separation – can be wastage.
If a spouse incurs large debts for non-essential purposes (say, to fund a risky business venture that fails, or personal expenses unrelated to family needs), that debt has effectively reduced the net asset pool.
The court might treat the wasted funds as that spouse's responsibility alone.
These examples all share a common thread – one party's conduct significantly depleted the matrimonial assets without justification.
They go beyond the ordinary day-to-day spending or reasonable use of funds. Wastage is often deliberate or reckless, and it leaves the other spouse financially worse off than they should have been.
It's important to note that timing can be key – money wasted during the breakdown of the marriage or after separation (when the writing was on the wall) is more likely to be scrutinized as wastage than, say, a misjudged expense years earlier during a happy phase of the marriage.
Each case is different, but these scenarios above have all been cited in Australian cases as potential wastage acts.
How wastage differs from general spending
You might be wondering: at what point does spending money cross the line into "wastage"?
After all, during a marriage, couples spend money all the time – sometimes unwisely or on things the other spouse might not agree with.
Family law doesn't punish normal spending or bad investments made in good faith. Australia's system is a "no-fault" divorce system, meaning that generally the court isn't interested in marital misdeeds or extravagances unless they seriously affect the asset pool.
This is where wastage is different from ordinary spending.
Ordinary expenditures and debts – even if incurred by one party – are usually considered a joint responsibility in a long marriage. The general rule (as established in cases like Kowaliw) is that financial losses that accrue during the relationship are normally shared by both parties.
For example, if an investment property dropped in value or a business venture failed, both spouses typically bear that loss when the property pool is divided.
Everyone makes financial mistakes or has living costs; the law acknowledges that and doesn't treat every dollar spent as a dollar "wasted."
Wastage, however, is the big exception.
It refers to "intentional or reckless dealing that wrongfully eats into the marital property", going beyond reasonable expenses.
Think of wastage as spending that is so unreasonable, selfish, or irresponsible that it would be unjust for both spouses to share the fallout.
A court looks for a threshold of unreasonableness – was the expenditure extravagant and unnecessary? Was it done without the other spouse's knowledge or against their interests?
If so, the law treats it as a "negative contribution" by the wasting party.
To illustrate the difference, consider two scenarios :
- General spending example : During the marriage, Spouse A invests $50,000 in stocks which later decline to $30,000. It was a bona fide investment that didn't pan out. In a property split, that $20,000 loss is just part of the shared financial history – not wastage. Both parties indirectly share the loss because it wasn't an egregious or malicious act; it was a risk that didn't work out.
- Wastage example : Meanwhile, Spouse B secretly spent $50,000 of joint savings on an exclusive club membership and luxury vacations for themselves (or squandered it gambling) while the marriage was breaking down. Now only $5,000 is left. This is far beyond normal spending. Spouse B's actions were self-serving and depleted the assets without benefit to the family. A court would likely consider this wastage and not make Spouse A split that loss equally.
In short, wastage is judged by degree and intent. Regular living expenses, reasonable leisure spending, or unlucky financial decisions usually won't be labelled wastage if they were in the realm of normal life.
But if the spending behaviour "reaches a certain threshold of unreasonableness" – especially if done in bad faith or in anticipation of divorce – then the court can step in.
Wastage is one of the few times a spouse's conduct does matter in a property settlement (since, generally, misconduct like infidelity doesn't affect asset division in no-fault divorce).
It's the legal system's way of saying: "If you trash the assets on purpose or through gross irresponsibility, you can't expect your ex to bear the cost."
Also, keep in mind that necessary costs of living are not wastage. For example, spending money on rent, groceries, children's needs, or basic living expenses after separation is typically considered reasonable and not added back into the pool.
As one court put it, "parties are entitled to live their lives independently" post-separation – meaning you're allowed to use some of the assets for normal needs without being accused of wastage.
It's the excesses and the ulterior motives that differentiate wastage from ordinary spending.
How wastage affects property settlement
When wastage is proven in a family law case, the court's goal is to ensure a fair property settlement despite the lost assets.
But since you can't magically bring back money that's been wasted, how do courts deal with it?
The answer is usually through financial adjustments often referred to as "addbacks."
In practical terms, if the court finds that one spouse wasted assets, it can add back the value of those wasted assets to the asset pool on paper.
This doesn't mean the money reappears, but the court will treat the asset pool as if the wastage hadn't occurred when deciding how to divide what's left.
For example, if a husband gambled away $100,000 of savings, the court might calculate the property division as if that $100,000 were still there – effectively crediting that amount to the wife's side of the ledger (or subtracting it from the husband's share).
This ensures the innocent spouse isn't unfairly short-changed by the other's actions.
There are a couple of ways the court might implement this :
- Addback as a notional asset : The wasted amount can be "notionally added" back into the asset pool before splitting. For instance, if the pool would have been $500k but is now $400k after one party's spree, the court might still base the division on $500k. Then it will likely allocate that missing $100k to the irresponsible party's side of the equation. In effect, the spouse who wasted the money receives $100k less from the real assets available, compensating the other spouse.
- Percentage adjustment : Alternatively, the court might adjust the percentage split of the remaining assets in favour of the innocent spouse. Using the same example, instead of a 50/50 split of the $400k remaining, a judge might award a higher percentage (say 60%) of that $400k to the innocent spouse to account for what was lost. This way, the outcome is more equitable given the circumstances.
The guiding principle is achieving a "just and equitable" result (per Section 79(2) of the Family Law Act).
If one party has already enjoyed or dissipated a chunk of the assets, justice might require giving the other party a larger portion of what's left.
Essentially, wastage can come out of the wasting party's share.
It's important to note that courts have broad discretion here. There's no fixed formula for wastage adjustments – it will depend on the facts, the amount wasted, and the overall financial picture.
In some cases, judges have added back the exact dollar value of assets wasted (like the proceeds of a sale that were frittered away).
In other cases, especially if the wasted money is truly gone and unrecoverable, a judge might opt for a more nuanced percentage adjustment rather than a strict addback.
Also, not every claim of wastage will lead to an adjustment. The waste has to be significant in value relative to the asset pool. Minor or trivial expenditures, even if unwise, won't move the needle.
But if the wastage was substantial and proven, the court's likely to reallocate the financial burden so that the innocent spouse doesn't pay for the other's folly.
One example from case law is the Townsend case :
The husband sold a taxi license (an income-generating asset) for $148,000 and spent most of it on himself, rather than for the family's benefit.
The court deemed this a wasteful, premature distribution of a major asset and added back the $148,000 to the pool.
In doing so, the judge ensured the wife's entitlements were calculated as if that money were still in play, thereby preventing the husband from profiting off his own reckless decision.
In summary, when wastage is established, the likely effect is that the wasteful spouse will receive a smaller share of the remaining assets than they otherwise might have.
The court can be quite firm that "you spent it, so you bear it."
This not only creates fairness but also sends a message : attempts to cheat or defeat your spouse's entitlements by burning through assets will not be rewarded.
How to prove wastage in a family law case
If you believe your ex has wasted money that should've been part of the property pool, the burden is on you to prove it. Here's what helps :
- Find the paper trail : Look for clear evidence, like bank statements, receipts, gambling records, or large cash withdrawals, showing where the money went.
- Prove it was reckless : It's not enough that they spent money, you have to show it was irresponsible or done on purpose, like splurging after separation or hiding funds to keep them from you.
- Show the impact : The court needs to see how the spending affected the overall asset pool. Was there $80k in savings that's now gone? Be specific with amounts.
- Act quickly : If it's still happening, you may be able to get a court order to freeze accounts or stop further spending.
- Get expert help : In complex cases, a financial expert can trace missing money or show dodgy transfers designed to hide assets.
The court needs strong, clear proof, not just suspicion. But if you have the evidence, a successful wastage claim can change how assets are divided.
When wastage claims might not succeed
Not every wastage claim in divorce cases will succeed.
Here's when a wastage argument might fail :
- Reasonable spending : Money spent on normal living expenses, like rent, bills, or groceries, usually isn't considered wastage.
- Joint decisions : If both spouses agreed or took part in the spending, it's not typically seen as wastage.
- Lack of evidence : Without clear proof of intentional or reckless spending, a wastage claim may be dismissed.
- Minor amounts : Courts usually won't address wastage claims involving small amounts relative to the total assets.
- Court discretion : Even if wastage is proven, courts may not always fully adjust the property split, considering fairness and future needs.
- Timing : If the spending happened long ago and was accepted at the time, courts might not consider it wastage during divorce.
In short, wastage claims need solid evidence, clear intent, and significant financial impact to succeed. Getting legal advice can help you understand if your claim has a good chance of success.
FAQ's
1. What is wastage in a divorce?
Wastage in a divorce means one spouse has intentionally or carelessly spent or lost marital assets without the other's consent, significantly reducing what's available to divide.
Common examples include excessive gambling, reckless spending, selling assets cheaply, or destroying property. If wastage is proven, the court might adjust the settlement to compensate the other spouse.
2. Can gambling losses be considered wastage?
Yes. Gambling losses are often claimed as wastage in divorce cases, especially when the losses are large, irresponsible, and have significantly reduced marital funds.
Routine gambling typically doesn't count, but problem gambling that drains savings or creates debts usually qualifies as wastage.
3. How do courts handle wasted assets?
Courts treat wasted money or assets as if they were still available when dividing property. This "add-back" method means the spouse responsible for wastage gets a smaller share of the remaining assets to make things fair.
No one actually pays the wasted money back; it's just considered in calculations.
4. Do I need evidence to prove wastage?
Yes, strong evidence is essential.
You need to show clearly how, when, and where assets were wasted. Useful evidence includes bank statements, credit card bills, gambling records, and asset sale details.
If you suspect wastage, collect as much documentation as possible and seek legal help early.
5. Is all reckless spending wastage?
Not necessarily. Courts differentiate between ordinary poor financial choices and serious wastage.
Small or justified expenses usually aren't considered wastage. Spending must be significantly reckless or irresponsible and must clearly harm the asset pool.
Courts evaluate each situation individually, typically only adjusting settlements in serious cases.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
