A binding financial agreement, also referred to as a BFA, is a legally binding contract made under the Family Law Act 1975 that allows couples in Australia to determine how their property, financial resources, and liabilities will be divided if their relationship ends.
BFAs can be entered into before, during, or after a marriage or de facto relationship, and when properly executed, they prevent the need for court involvement in property settlement disputes.
Whether you are engaged, already married, in a de facto relationship, or going through a separation, a BFA gives you and your partner the ability to take control of your financial future on your own terms.
This guide covers everything you need to know about BFAs in Australia, from how they work and what they can cover, to the legal requirements that make them enforceable and the circumstances in which they can be challenged.
How Does a Binding Financial Agreement Work in Australia?
A binding financial agreement works by allowing two people in a relationship to privately agree on how their finances will be handled, either during the relationship or in the event of a breakdown, without needing approval from the Family Court.
Unlike consent orders, which require a court to assess whether the terms are just and equitable before approving them, a BFA is a private contract between two parties.
Once both parties have received independent legal advice and signed the agreement, it becomes legally binding and effectively removes the court’s power to make orders about the financial matters covered in the agreement.
The Federal Circuit and Family Court of Australia describes a BFA as a contract that, if binding, “ousts the Court’s jurisdiction” in relation to financial or property proceedings between the parties.
This means the agreement replaces what would otherwise be a court-determined outcome with the terms the couple has agreed upon themselves.
What Types of Binding Financial Agreements Are There?
There are six types of binding financial agreements under the Family Law Act 1975, divided into two categories depending on whether the couple is married or in a de facto relationship.
For married couples, the Act provides for three types of BFA.
- A Section 90B agreement is made before the marriage takes place and is commonly referred to as a prenuptial agreement.
- A Section 90C agreement is made during the marriage, whether the relationship is still functioning or has already broken down.
- A Section 90D agreement is made after a divorce order has been granted.
- For de facto couples, the equivalent provisions sit under Part VIIIAB of the Act.
- A Section 90UB agreement is made before the de facto relationship begins.
- A Section 90UC agreement is made during the de facto relationship.
- A Section 90UD agreement is made after the breakdown of the de facto relationship.
Each type of agreement must be expressly stated as being made under the relevant section of the Act.
This is a strict requirement, and failing to identify the correct section can result in the agreement being found invalid.
It is also worth noting that if de facto partners who have a financial agreement under Part VIIIAB later marry each other, that agreement becomes void upon marriage.
The couple would then need to enter into a new agreement under Section 90B or 90C to maintain financial protection.
What Can a Binding Financial Agreement Cover?
A BFA can cover a wide range of financial matters, giving couples considerable flexibility in how they structure their arrangements.
The primary purpose of most BFAs is to set out how property and financial resources will be dealt with if the relationship breaks down.
This includes real estate, bank accounts, shares, business interests, vehicles, superannuation, personal property, and any other assets held by either or both parties.
Can a BFA Deal With Spousal Maintenance?
Yes, a BFA can include provisions relating to spousal maintenance, which is the financial support one party may pay to the other after separation.
The agreement can specify whether maintenance will be payable, the amount, the duration, and the circumstances under which it may be varied or terminated.
It is also possible for a BFA to include a clause waiving spousal maintenance entirely, though courts may scrutinise such clauses if challenged.
Can a BFA Cover Debt and Liabilities?
A BFA can address how debts and liabilities will be allocated between the parties.
This includes mortgages, personal loans, credit card debts, HECS-HELP debts, and business liabilities.
Specifying debt allocation in a BFA can be particularly important where one party entered the relationship with significant debts or where the couple has taken on joint liabilities during the relationship.
Can a BFA Include Superannuation?
Superannuation can be dealt with in a BFA through what is known as a superannuation agreement, which is made under Section 90XH of the Family Law Act 1975.
A superannuation agreement can be included within a Section 90B, 90C, or 90D agreement, or it can be a standalone agreement that deals solely with how super will be split.
This allows couples to flag or split superannuation interests as part of their overall financial arrangement.
What Can a BFA Not Cover?
A BFA cannot make binding arrangements about parenting or child custody matters.
The Family Law Act 1975 reserves decisions about the care, welfare, and development of children to the courts, and no private agreement can override the court’s jurisdiction in this area.
While child maintenance may potentially be addressed as an incidental or ancillary matter, the enforceability of such provisions is limited, and parenting orders must always be determined separately.
What Are the Legal Requirements for a Binding Financial Agreement?
For a BFA to be legally binding, it must satisfy the strict requirements set out in Section 90G of the Family Law Act 1975 for married couples, or Section 90UJ for de facto couples.
These requirements are not optional, and failing to meet even one of them can render the entire agreement unenforceable.
Does a BFA Need to Be Signed by Both Parties?
Yes, the agreement must be signed by all parties.
This is the most basic requirement, and without the signatures of both parties, the document is not a financial agreement under the Act.
Is Independent Legal Advice Required for a BFA?
Each party must receive independent legal advice from their own Australian legal practitioner before signing the agreement.
The advice must cover the effect of the agreement on that party’s rights, as well as the advantages and disadvantages of entering into the agreement at the time the advice is given.
This means each person must have their own separate lawyer.
One lawyer cannot advise both parties, as the requirement is specifically for independent advice.
What Is a Certificate of Independent Legal Advice?
Either before or after signing the agreement, each party must be provided with a signed statement from their legal practitioner confirming that the required independent legal advice was given.
This is commonly referred to as a certificate of independent legal advice or a solicitor’s certificate.
A copy of each party’s certificate must also be provided to the other party or their lawyer.
Without these certificates, the agreement will not satisfy the requirements of Section 90G and may not be enforceable.
What Happens if the Technical Requirements Are Not Met?
If one or more of the technical requirements under Section 90G are not satisfied, the agreement is not automatically binding.
However, Section 90G(1A) provides a safety net.
A court may still declare the agreement binding if it is satisfied that it would be unjust and inequitable for the agreement not to bind the parties, even though not all technical requirements were met.
This discretion was introduced following the case of Black & Black, where a BFA was found to be non-binding due to a technical failure relating to the certificate of legal advice.
While this provision offers some protection, it is not a guaranteed fallback, and parties should always aim to comply with every requirement to avoid costly litigation.
How Is a Binding Financial Agreement Created?
Creating a BFA involves several steps, and the process typically takes between two and six weeks depending on the complexity of the couple’s financial situation and how quickly both parties can obtain independent legal advice.
What Is the First Step in Getting a BFA?
The process begins with both parties discussing and reaching a general understanding about how they want their financial arrangements to be structured.
This includes identifying all assets, liabilities, superannuation interests, and income sources that each party holds or expects to acquire.
How Is a BFA Drafted?
Once the parties have agreed on the broad terms, one party’s lawyer will draft the agreement.
The draft must clearly identify the relevant section of the Family Law Act under which the agreement is being made, and it must set out the agreed terms in clear, unambiguous language.
The other party’s lawyer will then review the draft, raise any concerns, and negotiate amendments if necessary.
What Happens After the BFA Is Drafted?
After the final terms are agreed upon, each party must receive independent legal advice about the agreement from their own lawyer.
Once the advice has been given, both parties sign the agreement.
Each lawyer then provides a signed certificate of independent legal advice, and copies of these certificates are exchanged between the parties.
At this point, the agreement becomes binding.
Why Do People Get Binding Financial Agreements?
People enter into BFAs for a variety of practical and personal reasons, and the decision is often driven by a desire to create certainty and avoid the uncertainty of court proceedings in the event of a separation.
How Does a BFA Protect Assets?
One of the most common reasons for entering into a BFA is to protect pre-existing assets that one party brings into the relationship.
This might include property, savings, investments, or a family inheritance that the party wants to ensure remains theirs if the relationship ends.
Without a BFA, these assets may be included in the property pool and subject to division under the Family Law Act’s discretionary framework.
A BFA allows parties to ring-fence specific assets and remove them from any future property settlement discussion.
Can a BFA Protect a Business?
A BFA is often used by business owners and entrepreneurs to shield their business interests from being divided in a property settlement.
If a business was established before the relationship, or if business partners and shareholders have concerns about the impact of a partner’s separation, a BFA can specify that the business remains with the owning party.
This can also provide reassurance to business partners who may otherwise be drawn into family law proceedings.
How Does a BFA Help Avoid Court?
A properly drafted BFA removes the need to go to court for a property settlement after separation.
Court proceedings can be expensive, time-consuming, and emotionally draining.
By agreeing on financial terms in advance, couples can separate and move on without the delays and costs associated with litigation.
This is particularly valuable for couples with complex financial arrangements or significant asset pools, where court proceedings could take years and cost tens of thousands of dollars.
Are BFAs Only for Wealthy Couples?
No, BFAs are not just for high-net-worth individuals.
Any couple can benefit from a BFA, regardless of the size of their asset pool.
Couples who are entering a second marriage or a blended family arrangement, couples where one partner has significantly more debt than the other, and couples who simply want clarity about their financial rights and obligations can all benefit from having a BFA in place.
Can a Binding Financial Agreement Be Overturned or Set Aside?
Yes, a court can set aside a binding financial agreement under certain circumstances, even if it was properly signed and both parties received independent legal advice.
The grounds for setting aside a BFA are set out in Section 90K of the Family Law Act 1975 for married couples, and Section 90UM for de facto couples.
What Are the Grounds for Setting Aside a BFA?
The court may set aside a BFA if it is satisfied that the agreement was obtained by fraud, which includes the non-disclosure of a material matter such as failing to reveal significant assets or liabilities.
A BFA can also be set aside if a party entered into it for the purpose of defrauding a creditor, or with reckless disregard of a creditor’s interests.
The agreement may be challenged if it is found to be void, voidable, or unenforceable under general principles of contract law and equity.
This includes situations where one party entered the agreement under duress, undue influence, or as a result of unconscionable conduct by the other party.
A court may also set aside a BFA if circumstances have changed since the agreement was made in a way that affects the care, welfare, and development of a child, and continuing to enforce the agreement would cause hardship.
If the agreement has become impracticable to carry out due to changed circumstances, this is another ground on which a court may intervene.
What Lessons Can Be Learned From Thorne v Kennedy?
The landmark High Court case of Thorne v Kennedy [2017] HCA 49 is the most significant Australian case on the setting aside of binding financial agreements.
In this case, the High Court unanimously set aside both a pre-nuptial and post-nuptial financial agreement on the grounds of unconscionable conduct, with the majority also finding the agreements were voidable due to undue influence.
The case involved a significant power imbalance between the parties.
The husband was an Australian property developer with assets worth between $18 million and $24 million, while the wife had no substantial assets, had moved to Australia from overseas for the purposes of the marriage, and had no community or support network in the country.
The husband presented the pre-nuptial agreement just 11 days before the wedding and told the wife that if she did not sign, the wedding would not go ahead.
The wife’s own lawyer described the agreement as the worst she had ever seen and advised against signing it.
Despite this advice, the wife felt she had no real choice and signed the agreement four days before the ceremony.
The High Court identified several factors that were relevant in assessing undue influence in the context of financial agreements.
These included:
- Whether the agreement was offered on a take-it-or-leave-it basis with no room for negotiation
- The emotional circumstances surrounding the signing, including implicit or explicit threats to cancel the wedding
- Whether adequate time was given for reflection
- The extent to which the weaker party was isolated or dependent on the other
- The nature of the parties’ relationship and the power dynamics involved
- Whether independent legal advice was received and what effect it had on the party’s decision
Thorne v Kennedy made clear that receiving independent legal advice does not, on its own, prevent a court from finding that a party was subject to undue influence or unconscionable conduct.
The case serves as a warning that BFAs must be entered into freely and voluntarily by both parties, with adequate time for reflection and genuine negotiation.
What Is the Difference Between a BFA and a Consent Order?
A BFA and a consent order are both legal mechanisms for resolving financial matters after separation, but they work in fundamentally different ways.
A BFA is a private contract between two parties that does not require court approval.
It can be entered into before, during, or after a relationship, and its enforceability depends on meeting the technical requirements under the Family Law Act.
A consent order, by contrast, is an agreement that is submitted to the court for approval.
The court must be satisfied that the proposed terms are just and equitable before it will make the order.
Once made, a consent order has the same legal force as any other court order.
The key practical difference is timing.
Consent orders can only be made after separation, while BFAs can be entered into at any stage of a relationship.
BFAs also offer more flexibility in their terms because they do not need to meet the court’s just and equitable standard, although this flexibility comes with the trade-off that BFAs can be more vulnerable to being set aside.
Do You Need a Lawyer for a Binding Financial Agreement?
Yes, engaging a lawyer is not just advisable but legally required for a BFA to be binding in Australia.
The Family Law Act 1975 mandates that each party must receive independent legal advice from a qualified Australian legal practitioner before signing the agreement.
Without this step, the agreement cannot satisfy the requirements of Section 90G and will not be enforceable.
Can You Make Your Own BFA Without a Lawyer?
While there is nothing stopping two people from writing their own agreement, a DIY or template BFA will not be legally binding unless both parties have separately obtained independent legal advice and received the required certificates.
Template agreements and online forms carry significant risks because they may not address the specific circumstances of the parties, may fail to comply with the technical requirements of the Act, and may contain clauses that are unenforceable or open to challenge.
The cost of having a BFA set aside in court proceedings is almost always far greater than the cost of having one properly prepared in the first place.
How Much Does a Binding Financial Agreement Cost?
The cost of a BFA varies depending on the complexity of the couple’s financial situation and the law firm preparing the agreement.
Some firms charge on an hourly basis, which can make it difficult to predict the final cost.
Others, like my law firm, offer fixed-fee BFA services so that both parties know exactly what they will pay from the outset.
Because both parties need their own independent legal advice, the total cost involves fees for at least two lawyers.
Fixed-fee arrangements can provide greater certainty and remove the anxiety of watching costs accumulate on an hourly rate.
How Long Does a Binding Financial Agreement Last?
A BFA remains in effect until it is terminated by agreement between the parties, replaced by a new BFA, or set aside by a court.
There is no automatic expiry date for a binding financial agreement.
However, circumstances can change significantly over the course of a long relationship, and an agreement that was fair and appropriate at the time it was signed may become outdated or impractical years later.
For this reason, it is generally recommended that couples review their BFA periodically, particularly after major life events such as the birth of a child, a significant change in income or assets, or a change in living arrangements.
How Can a BFA Be Terminated?
A BFA can be terminated in two ways under the Family Law Act.
The first is by including a termination provision in a new financial agreement.
If both parties enter into a new BFA, the new agreement can include a clause that terminates the previous one, provided all parties to the original agreement are also parties to the new agreement.
The second method is through a termination agreement made under Section 90J of the Act.
A termination agreement must meet similar requirements to the original BFA, including that both parties receive independent legal advice and obtain signed certificates from their lawyers.
Are Binding Financial Agreements Enforceable in Australia?
Yes, binding financial agreements are enforceable in Australia, provided they satisfy the requirements of the Family Law Act 1975.
When a BFA is properly executed with all technical requirements met, it operates as a legally binding contract, and the court can make orders to enforce its terms.
However, enforceability is not guaranteed.
As discussed in the section on setting aside a BFA, there are several grounds on which a court can intervene and declare an agreement unenforceable.
The strength of a BFA’s enforceability depends on the quality of its drafting, the completeness of financial disclosure by both parties, the adequacy of the independent legal advice received, and the fairness of the circumstances in which the agreement was entered into.
Does a BFA Need to Be Registered?
No, a BFA does not need to be registered with any court or government body to be legally binding.
Unlike consent orders, which are filed with and approved by the court, a BFA is a private document that takes effect once it has been properly signed and the certificates of independent legal advice have been exchanged.
Both parties should keep the original signed agreement and certificates in a safe place.
Do De Facto Couples Need a Binding Financial Agreement?
De facto couples have the same ability to enter into BFAs as married couples under the Family Law Act 1975, and there are strong reasons for doing so.
Many people are not aware that de facto partners have similar rights to married couples when it comes to property division after separation.
Under Part VIIIAB of the Act, the court can adjust property interests between de facto partners in the same way it can for married couples.
This means that without a BFA, a de facto partner may have a claim on assets that the other partner assumed would remain theirs.
A BFA provides certainty and protection for de facto couples in the same way it does for married couples.
There is one important distinction for de facto couples in Western Australia.
The parties must be ordinarily resident in a participating jurisdiction at the time they make the agreement, and Western Australia is not a participating jurisdiction under the federal de facto provisions.
De facto couples in Western Australia are instead covered by the Family Court Act 1997 (WA), which has its own provisions for financial agreements.
What Role Does Financial Disclosure Play in a BFA?
Full and honest financial disclosure is one of the most critical elements of a binding financial agreement.
Both parties are expected to provide a complete picture of their financial position, including all assets, liabilities, income, and financial resources.
The importance of disclosure cannot be overstated.
Under Section 90K(1)(a) of the Family Law Act, a court can set aside a BFA if it was obtained by fraud, which specifically includes the non-disclosure of a material matter.
If one party hides assets, undervalues property, or fails to disclose significant debts, the other party has grounds to challenge the agreement, potentially years after it was signed.
Disclosure typically involves providing a complete list of assets and information, including:
- All real property interests
- Bank account balances
- Share portfolios and managed funds
- Business interests and valuations
- Superannuation balances
- Vehicles and personal property of significant value
- Outstanding debts and liabilities
- Income from all sources
- Any expected inheritances or financial resources
The more thorough the disclosure process, the more robust the agreement will be if it is ever challenged.
What Happens to a BFA if One Party Dies?
Under Section 90H of the Family Law Act 1975, a binding financial agreement that is in force at the time of a party’s death continues to operate despite that death.
The agreement operates in favour of, and is binding on, the legal personal representative (executor or administrator) of the deceased party’s estate.
This means the surviving party can enforce the terms of the BFA against the estate, and the estate can likewise enforce its terms against the surviving party.
This interaction between a BFA and estate planning is important to understand.
A BFA can affect what a surviving partner is entitled to receive from the deceased’s estate, and it may also affect the rights of beneficiaries under a will.
For this reason, couples who have a BFA should ensure their wills and estate plans are consistent with the terms of the agreement.
What Common Mistakes Should Be Avoided When Creating a BFA?
There are several common mistakes that can weaken or invalidate a binding financial agreement.
Being aware of these pitfalls can help ensure your BFA is robust and enforceable.
Is Failing to Make Full Disclosure a Common Problem?
Incomplete or inaccurate financial disclosure is one of the most frequent grounds on which BFAs are challenged.
Both parties must provide a thorough and honest account of their financial position.
Failing to disclose assets, undervaluing property, or omitting liabilities can give the other party grounds to have the agreement set aside for fraud.
Can Rushing the Process Undermine a BFA?
Presenting a BFA to your partner at the last minute, such as days before a wedding, significantly increases the risk that the agreement will be found to have been entered into under duress or undue influence.
The Thorne v Kennedy case made this risk particularly clear.
Both parties should have adequate time to read, understand, and consider the agreement before signing it.
Starting the BFA process well in advance of any upcoming wedding or major commitment is essential.
Does Using a Template BFA Create Risks?
Template and DIY BFAs carry significant risks because they may not be tailored to the specific financial circumstances of the parties.
A generic template may omit important clauses, fail to properly identify the assets and liabilities of each party, or use language that is ambiguous and open to multiple interpretations.
The cost of defending or challenging a poorly drafted BFA in court almost always exceeds the cost of having a proper agreement prepared from the start.
Need Help With a Binding Financial Agreement?
A binding financial agreement is one of the most effective tools available under Australian family law for protecting your financial interests and providing certainty about how assets will be divided if a relationship ends.
Whether you need a pre-nuptial agreement, a BFA during your relationship, or a post-separation agreement, the BFA lawyers at my law firm can help you with drafting and reviewing BFAs at a transparent, fixed fee.
Contact our team today by calling 1300 529 888.
Frequently Asked Questions
What is a binding financial agreement in Australia?
A binding financial agreement is a legally binding contract made under the Family Law Act 1975 that allows couples to agree on how their property, financial resources, and liabilities will be divided if their relationship breaks down. BFAs can be entered into before, during, or after a marriage or de facto relationship and, when properly executed, they prevent the need for court involvement in property settlement matters.
Do both parties need their own lawyer for a BFA?
Yes, the Family Law Act 1975 requires each party to receive independent legal advice from their own Australian legal practitioner before signing a binding financial agreement. Each lawyer must also provide a signed certificate confirming that the advice was given. One lawyer cannot act for both parties, and without separate independent legal advice, the agreement will not satisfy the requirements of Section 90G and may not be enforceable.
Can a binding financial agreement be set aside by a court?
Yes, a court can set aside a binding financial agreement under Section 90K of the Family Law Act 1975 if grounds such as fraud, non-disclosure of material assets, duress, undue influence, unconscionable conduct, or impracticability due to changed circumstances are established. The landmark case of Thorne v Kennedy [2017] HCA 49 confirmed that even agreements where both parties received independent legal advice can be set aside if the circumstances of signing were unfair.
What is the difference between a BFA and a consent order?
A BFA is a private contract between two parties that does not require court approval and can be made before, during, or after a relationship. A consent order is an agreement submitted to the court for approval and can only be made after separation. The court must be satisfied that consent orders are just and equitable before making them, whereas a BFA does not need to meet this standard, though it can be more vulnerable to being challenged.
How long does a binding financial agreement last?
A binding financial agreement has no automatic expiry date and remains in effect until it is terminated by the parties through a termination agreement under Section 90J of the Family Law Act 1975, replaced by a new BFA, or set aside by a court. Couples are encouraged to review their BFA periodically, particularly after major life events such as the birth of a child or a significant change in financial circumstances.
Do de facto couples need a binding financial agreement?
De facto couples can enter into binding financial agreements under Part VIIIAB of the Family Law Act 1975, and there are strong reasons to do so. Under Australian law, de facto partners have similar rights to married couples regarding property division after separation, which means one partner may have a claim on the other’s assets without a BFA in place. A BFA provides the same certainty and asset protection for de facto couples as it does for married couples.