- The Family Law Act 1975 (Cth) allows parties in a marriage or de facto relationship to enter into a financial agreement to manage their finances during the course of their relationship, and to resolve disputes in the case of a relationship breakdown.
- This Binding Financial Agreement alters the normal avenue for division of property and other assets, deviating from the Family Law Court’s normal jurisdiction.
Binding Financial Agreement in Australia
A Binding Financial Agreement (BFA), or pre-nupital agreement, is a document or series of documents that govern your property interests in the event of a separation during a marriage or a de facto relationship. A BFA can be entered into before, during or after a relationship. If made after marriage, the binding financial agreement must be made within twelve months of an order of divorce.
The Family Law Act sets out the requirements before a BFA will become binding. This includes that each party has received independent legal advice about specific matters and that a certificate as to what advice was given is annexed to the Agreement and is signed by each legal advisor.
A financial agreement is binding on the parties to the agreement if, and only if:
- The agreement is in writing and signed by both parties; and
- The parties are contemplating entering a marriage or de facto relationship, are in a de facto relationship or marriage, have separated or divorced; and
- It includes a statement from each party to the agreement, before the agreement was signed that the party obtained independent legal advice on their rights and the advantages and disadvantages at the time that the advice was provided to the party of making the agreement; and
- Either before or after signing the agreement, each party was provided with a signed statement by a legal practitioner certifying that the advice with respect to the parties rights and advantages and disadvantages in entering the financial agreement was given; and
- A copy of the legal practitioner’s statement is given to the other party or a legal practitioner of the other party; and
- The agreement has not been terminated and has not been set aside by a court; and
- Includes a separation declaration unless the agreement is signed post-divorce.
- A financial agreement may include distribution of property, debts and other finance matters, spousal maintenance and other matters.
- For a BFA to be legal and binding, it must comply with the strict formalities set out in the Family Law Act, which includes that each party must enter the BFA of their own free will and be fully informed.
- Before BFAs are valid, each party must sign that they obtained their own independent legal advice.
Terminating a Binding Financial Agreement
There are certain circumstances set out in the Family Law Act where a Court may set aside a Binding Financial Agreement. These include:
- where the agreement has been obtained by fraudulent means, including material non-disclosure (e.g. by failing to disclose an asset);
- a party to the agreement entered into the BFA for the purpose of defrauding or defeating a creditor;
- the agreement is void or unenforceable (e.g. the BFA was not prepared properly and does not comply with the legislative requirements set out in section 90G or section 90UJ);
- circumstances have arisen since the BFA was made which make it impossible or impracticable for the BFA to be carried out;
- since the making of the BFA, a material change in circumstances has occurred (relating to the care, welfare and development of a child of the relationship) and, as a result of the change, a party to the agreement will suffer hardship if the Court does not set the BFA aside;
- a party’s conduct in the making of the BFA was, in all the circumstances, unconscionable;
- a “payment flag” is operating on a superannuation interest covered by the Agreement and there is no reasonable likelihood that the operation of the flag will be terminated by a “flag lifting” under that part; or
- the BFA covers at least one superannuation interest that is an “unsplittable interest”.
A Binding Financial Agreement can be “terminated” in one of two ways:
- the parties can enter into another financial agreement, provided that a specific provision is included in the new agreement stating that the former agreement is terminated; or
- the parties can enter into a “termination agreement” pursuant to section 90J (for married couples) or section 90UL (for de facto couples). As with the original BFA, for a termination agreement to be binding and enforceable, it must be signed by all parties to the agreement, and each of the parties must have received independent legal advice with respect to the termination agreement.
Frequently Asked Questions about Binding Financial Agreements
Q: What happens when my relationship ends and I do not have a BFA?
A: If your relationship ends, and you do not have a legal BFA, then you and your former partner/spouse will need to negotiate a property settlement of applying to the Family Court to make a determination.
Q: Can I prepare my own BFA?
A: Your BFA must be prepared by a lawyer, who will only act for you and you only. The first step towards a BFA is to discuss the matter with your partner. If your partner flatly refuses to enter a BFA, then you cannot proceed further with the process.
Q: What is a consent order?
A: Consenting orders document parenting arrangements or distribution of property with a former partner. These are normally made only after marriage or relationship has ended and, unlike BFAs, are lodged with the Court for approval.
Q: What other names are BFAs known for?
A: Binding Financial Agreements are also known as pre-nuptial agreements, post-nuptial agreements, cohabitation agreements, separation agreements and divorce agreements.