Table of Contents
- What Is Full Financial Disclosure?
- Can I Limit the BFA to Certain Assets or Liabilities?
- What Property Do I Have to Disclose?
- What About Superannuation?
- What About Future Property or Financial Resources?
- Do I Need to Get Formal Valuations?
- Not Sure If Something Needs to Be Disclosed?
- How Can LegalVision Help?
A binding financial agreement (BFA) is an agreement that sets out how parties to a marriage or de facto relationship will deal with their property and financial resources if the relationship breaks down. For a BFA to be binding, both parties must give full financial disclosure. As a result, if you plan to enter into a BFA it is essential that you understand exactly what financial information you must include for it to be enforceable by a court. This factsheet will set out your rights and obligations when giving financial disclosure and explain what property and resources you need to include.
What Is Full Financial Disclosure?
Under family law in Australia, full financial disclosure means you need to give ‘full and frank’ (complete and honest) disclosure of your total direct and indirect financial circumstances. Along with details of any property you own or substantially control, you must disclose:
- all earnings, whether from income/salary, returns from an investment property, share dividends or income from any other investment;
- all debts, including home loans, personal cards, HECS debts, credit cards and tax owed;
- financial resources, including superannuation, rights in a discretionary trust, life insurance policies or any likely inheritance;
- all earnings, property and financial resources that come to you indirectly, or via another person or beneficiary, such as your child or de facto partner;
- details of any property you have ‘disposed’ of (e.g. by selling, transferring, assigning or gifting it to someone else) in the year immediately before or after the separation; and
- the value of the assets at the time you are entering the BFA, not just a list of the assets.
It is good practice (especially in high wealth matters), to provide disclosure in the form of source material. For example, bank statements, property valuations, etc.
Can I Limit the BFA to Certain Assets or Liabilities?
There is technically nothing to prevent you from limiting the BFA to certain assets or liabilities under family law in Australia. However, it raises doubt as to the extent of financial disclosure given. As a result, agreements that are limited to certain assets or liabilities, particularly if you did not disclose everything before entering into them, are more likely to be set aside. If you fail to include or disclose any property or debts (for example, if you want to ‘hide’ an asset from your partner), the validity of the BFA could be challenged and it may be set aside by a Court.
What Property Do I Have to Disclose?
Family law and the courts broadly define property to include any property to which you are entitled. When preparing your BFA, you should disclose:
- as a general rule, any property you own worth $5000 or more, including vehicles, household furnishings, jewellery and artwork;
- cash or funds held in bank accounts;
- real estate you own, including overseas real estate;
- property held by a company ultimately controlled by you for your benefit;
- property held on trust by a third party for your benefit; and
- interest and/or shares in any company.
What About Superannuation?
In family law, superannuation is treated as property. However, it is different from other types of property because it is held in trust. There are superannuation splitting laws that set out how parties can split their super after separation if they wish to do so. Details of the split can be included in the BFA. It is important to include full and accurate details of any superannuation funds of which you are a member, and to account values at the time of entering the BFA. Generally, it is not possible to split a superannuation account with less than $5000. Those that receive less than $2000 cannot be split.
What About Future Property or Financial Resources?
You should also disclose any property, earnings or financial resources you expect to inherit, benefit from or receive in the future. For example, if you expect to inherit a substantial sum of money or a family business, you should disclose this as it will have an impact on your financial situation. It is also important to review your BFA over time, and update it if there is any substantial change in your financial situation. Failure to do this may also render the BFA void. If your BFA is deemed void, the court will essentially treat it as if the agreement was never made. As a result, it will not be enforceable.
Do I Need to Get Formal Valuations?
You do not need to obtain formal valuations, but any estimate of value must be genuine and reasonable. In the case of real property (e.g. houses, apartments, etc.), obtaining a market valuation is sometimes advisable. If the value of a business is unknown, it may be a good idea to instead note the business’ turnover and asset value.
Not Sure If Something Needs to Be Disclosed?
If you are unsure whether something needs to be disclosed, it is best to always err on the side of more disclosure given the stringent disclosure obligations.
How Can LegalVision Help?
LegalVision is a market disruptor in the commercial legal services industry. Our innovative business model and custom-built technology assist our lawyers to provide a faster, better quality and more cost-effective client experience. LegalVision was named the ‘Fastest Growing Law Firm in the Asia-Pacific’ by the Financial Times.
Our experienced legal team can assist you with drafting and reviewing binding financial agreements. If you have any questions about binding financial agreements, get in touch with our lawyers today by calling 1300 544 755 or by filling out the form on this page.
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