When relationships end, couples face numerous decisions about dividing their shared assets and liabilities. In Australia, two primary legal mechanisms help formalise these financial arrangements: Binding Financial Agreements (BFAs) and Consent Orders. While both serve to document financial settlements between separating couples, they differ significantly in their legal requirements, processes, and implications. Understanding these differences is crucial for making informed decisions about your financial future after a relationship breakdown.
Key Differences Between Binding Financial Agreements and Consent Orders
Legal Framework and Authority
Binding Financial Agreements and Consent Orders operate under different legal frameworks in Australia. BFAs are private contracts governed by the Family Law Act 1975, specifically sections 90B-90KA for married couples and sections 90UA-90UN for de facto relationships. These agreements derive their authority from contract law principles, with specific requirements outlined in family law legislation.
Consent Orders, on the other hand, are court orders approved by the Family Court or Federal Circuit and Family Court of Australia. Once approved, they have the same legal weight as any order made by a judge after a contested hearing. The court’s authority backs these orders, making them enforceable through court processes if either party fails to comply.
This fundamental difference in legal authority affects everything from how these arrangements are created to how they’re enforced and challenged. While both options can achieve similar outcomes in terms of asset division, their different legal foundations lead to varying processes, requirements, and implications.
Timing and Relationship Status Requirements
One of the significant advantages of Binding Financial Agreements is their flexibility regarding timing. Couples can enter into BFAs at various stages of their relationship:
- Before marriage or cohabitation (commonly known as prenuptial agreements)
- During a marriage or de facto relationship
- After separation or divorce
This flexibility allows couples to proactively plan their financial arrangements at any stage, including as a preventative measure before any relationship breakdown occurs.
Consent Orders, however, can only be obtained when a couple has separated or divorced. They’re designed specifically as a tool for formalising financial settlements after a relationship has ended. This limitation means they cannot be used as a preventative or planning tool during a relationship.
For couples wanting to establish financial certainty before or during their relationship, BFAs represent the only available option under Australian family law. This makes them particularly valuable for individuals entering second marriages, bringing significant assets into a relationship, or seeking to protect family businesses or inheritances.
Court Involvement and Approval Process
The level of court involvement represents another fundamental difference between these two legal instruments. Binding Financial Agreements require no court involvement or approval. They are private contracts between the parties that become legally binding once properly executed. This means BFAs can be finalised relatively quickly, without court appearances or the need to satisfy the court about the fairness of the agreement.
Consent Orders, as their name suggests, must be submitted to and approved by the court. Both parties complete an application for consent orders along with a draft of the proposed orders. The court then reviews the application to ensure the proposed arrangement is “just and equitable” before approving it. This judicial oversight adds a layer of scrutiny that BFAs don’t undergo.
The court assessment process typically takes 1-3 months from submission to approval, depending on the court’s workload. While the parties don’t usually need to appear in court personally, the application process requires detailed financial disclosure and completion of specific court forms. The requirement for court approval means that unconscionable or grossly unfair arrangements are less likely to be formalised through Consent Orders than through BFAs.
Legal Requirements and Formalities
Both legal instruments have specific requirements that must be met for them to be valid and enforceable, but these requirements differ substantially.
For a Binding Financial Agreement to be legally binding, it must:
- Be in writing
- Specify the section of the Family Law Act under which it is made
- Be signed by both parties
- Include a statement that each party received independent legal advice about the advantages and disadvantages of the agreement
- Include certificates signed by the lawyers who provided that advice
- Be provided in its final form to both parties
The requirement for independent legal advice is stringent—each party must receive advice from a separate lawyer who then certifies that this advice was provided. This requirement aims to protect both parties from entering agreements without understanding their legal implications.
For Consent Orders, the requirements include:
- Completing an Application for Consent Orders form (Form 11)
- Providing a draft of the proposed orders
- Including detailed financial information from both parties
- Demonstrating to the court that the proposed arrangement is just and equitable
The “just and equitable” requirement means the court will examine whether the proposed settlement appropriately considers the financial circumstances of both parties, their contributions to the relationship, and their future needs. This evaluation adds a substantive fairness element that isn’t required for BFAs.
Costs and Complexity
The financial costs associated with each option can be significant factors in deciding which path to take. Binding Financial Agreements typically cost more upfront due to the requirement for each party to obtain independent legal advice. The cost of preparing a BFA in Australia generally ranges from $3,000 to $8,000, depending on the complexity of the agreement and the assets involved. This cost covers drafting the agreement and the independent legal advice required for both parties.
However, at my law firm, we offer binding financial agreements for a fixed fee of just $2750.
Consent Orders usually have lower upfront legal costs because independent legal advice, while recommended, isn’t mandatory. The court filing fee for Consent Orders is approximately $170 (as of 2023, though this may change), and legal assistance with preparing the application might cost between $2,000 and $5,000, depending on complexity.
However, the total cost should be considered alongside other factors such as timing, certainty, and the particular circumstances of each case. For complex asset pools or situations involving businesses, trusts, or substantial superannuation interests, the professional advice required may increase costs for either option.
Enforceability and Setting Aside
Both Binding Financial Agreements and Consent Orders are legally enforceable, but they differ in how easily they can be challenged or set aside by a court.
BFAs can be set aside by the court on various grounds, including:
- Fraud or non-disclosure of assets
- Unconscionable conduct
- Impracticality of enforcement
- Material change in circumstances relating to the care of children
- Technical defects in the agreement or process
- Duress, undue influence, or unconscionable conduct
The Family Law Act provides relatively broad grounds for challenging BFAs, which means they may offer less certainty in terms of finality compared to Consent Orders.
Consent Orders are more difficult to challenge because they already have court approval. They can typically only be set aside in limited circumstances such as:
- Fraud
- Duress
- Suppression of evidence
- Miscarriage of justice
- Exceptional circumstances that make it impractical to carry out the orders
This higher threshold for setting aside Consent Orders provides greater finality and certainty for parties seeking a conclusive resolution to their financial matters.
Additional Considerations When Choosing Between BFAs and Consent Orders
Privacy and Confidentiality Aspects
Privacy considerations may influence the choice between a BFA and Consent Orders. Binding Financial Agreements are private contracts between the parties. They remain confidential documents unless they become the subject of court proceedings. This confidentiality can be particularly important for high-net-worth individuals or public figures who prefer to keep their financial arrangements private.
Consent Orders, while not automatically public, become part of the court record. While family law court records aren’t generally accessible to the public without special permission, they aren’t as inherently private as BFAs. For those with significant privacy concerns, this distinction may be relevant.
The private nature of BFAs also means there’s no public scrutiny of their terms, which can be either an advantage or disadvantage depending on perspective. This privacy must be balanced against the greater certainty that comes with court approval of Consent Orders.
Tax Implications and Stamp Duty Considerations
The method chosen to formalise financial arrangements can have different tax implications in Australia. Both Binding Financial Agreements and Consent Orders can provide exemptions from stamp duty and capital gains tax (CGT) for property transfers between separating spouses, but the specifics may vary.
Under Australian tax law, transfers of property between separating spouses pursuant to a formal agreement (either a BFA or Consent Orders) generally qualify for CGT rollover relief. This means the tax liability is deferred until the receiving spouse eventually sells the asset. However, the technical requirements for these exemptions may differ slightly between the two options.
For stamp duty exemptions, each Australian state and territory has its own legislation. Generally, both BFAs and Consent Orders qualify for exemptions, but some jurisdictions may have specific requirements about the form of the agreement. It’s essential to consult with a tax professional about the particular implications in your state or territory.
Superannuation Splitting Requirements
Superannuation is often one of the most significant assets in Australian property settlements. The process for splitting superannuation differs between BFAs and Consent Orders in important ways.
Consent Orders can include provisions for superannuation splitting that are directly enforceable against superannuation trustees. Once approved by the court, these orders can be served on the relevant superannuation fund, which must then implement the split according to the terms specified.
Binding Financial Agreements can also include provisions for superannuation splitting, but they require an additional step. For a BFA to be effective against a superannuation trustee, it must be accompanied by a separate court order that implements the superannuation split as agreed in the BFA. This requires an additional application to the court, adding a step to the process.
This procedural difference means that for couples with significant superannuation assets, Consent Orders might offer a more streamlined approach to superannuation splitting, while BFAs require an additional court application specifically for the superannuation component.
Ongoing Obligations and Modification Possibilities
Both legal instruments create binding obligations, but they differ in how easily they can be modified if circumstances change after they’re finalised.
Binding Financial Agreements can be terminated or modified relatively easily if both parties agree to do so. The parties can create a new BFA that terminates or replaces the existing one, provided they follow the same formal requirements (including independent legal advice). This flexibility can be advantageous if circumstances change or if certain provisions become impractical.
Modifying Consent Orders is more complex and usually requires an application to the court. Unless both parties agree to set aside the orders and submit new ones, changing Consent Orders typically requires demonstrating to the court that there has been a significant change in circumstances since the orders were made. This higher threshold for modification means Consent Orders provide greater finality but less flexibility compared to BFAs.
Practical Implications of Choosing Between BFAs and Consent Orders
Relationship Dynamics and Negotiation Contexts
The choice between a Binding Financial Agreement and Consent Orders may be influenced by the dynamics of the relationship, particularly in separation contexts. BFAs can sometimes be perceived as more adversarial, especially when proposed during a relationship, as they explicitly contemplate the possibility of separation. This perception can create tension in some relationships, although a thoughtfully presented BFA can also provide security and clarity for both parties.
Consent Orders typically arise in the context of an already agreed settlement following separation. Since both parties must agree to the proposed orders before submission to the court, they usually represent a mutually acceptable compromise. The court’s oversight also provides assurance that the agreement meets basic fairness standards, which can be reassuring when trust between parties has been compromised.
For amicable separations where both parties are communicating effectively, either option can work well. However, in high-conflict separations, the court’s involvement through Consent Orders may provide additional structure and accountability that helps finalise arrangements despite ongoing tensions.
Time Considerations and Urgency Factors
The timeframe required to finalise each type of agreement can be a crucial consideration for separating couples. Binding Financial Agreements can potentially be completed more quickly, as they don’t require court approval. Once drafted and reviewed, the process involves obtaining independent legal advice for each party and signing the agreement. This process might take a few weeks to a few months, depending on the complexity and how quickly the parties can obtain legal advice.
Consent Orders generally take longer due to the court approval process. After preparing and submitting the application, parties typically wait 1-3 months for court approval, depending on the court’s caseload. This additional time must be factored into planning, especially if certain financial matters are time-sensitive.
For urgent situations, such as when property needs to be sold quickly or when one party wishes to relocate, the timeframe differences between these options can be significant. In some cases, interim arrangements might be necessary while waiting for formal agreements to be finalised.
Need Expert Guidance on Financial Agreements After Separation?
Navigating the complexities of Binding Financial Agreements and Consent Orders requires careful consideration of your specific circumstances, including the nature of your relationship, your asset pool, and your long-term objectives. The right choice depends on your individual situation, priorities, and the nature of your relationship with your former partner.
As binding financial agreement lawyers in Australia, my law firm can help you understand which option best suits your needs. Our team provides fixed-fee services for both Binding Financial Agreements and Consent Orders, ensuring you receive expert guidance without uncertainty about costs. Contact our friendly team today by calling 1300 529 888 to discuss your specific circumstances and take the first step toward securing your financial future.