A binding financial agreement (BFA) is a private written contract, made under the Family Law Act 1975 (Cth), that sets out how a couple's property, superannuation, debts and other finances will be divided if their relationship ends. Married and de facto couples in Victoria can make one before the relationship, during it, or after separation. It does not need court approval, but it is only binding if each party receives independent legal advice before signing.
Key takeaways- A BFA made before a marriage or de facto relationship is what most people call a prenup.
- Each party needs their own lawyer. Without independent legal advice and a signed statement from each lawyer, the agreement is not binding.
- A court can set a BFA aside for reasons such as fraud, non disclosure, undue influence, unconscionable conduct, or a material change involving the care of a child.
- Full financial disclosure and signing well ahead of a wedding or major purchase are the best protection against a later challenge.
- A BFA cannot decide parenting arrangements.
What Is a Binding Financial Agreement?
A binding financial agreement is a contract between two people in a relationship that decides, in advance, how their financial matters will be dealt with if they separate. It is made under Part VIIIA of the Family Law Act 1975 (Cth) for married couples and Part VIIIAB for de facto couples. Victoria has referred its powers over de facto relationships to the Commonwealth, so the same federal rules apply to de facto couples here.
The key difference from other ways of dividing property is that a BFA is private. A court does not review it or decide whether it is fair. If it meets the legal requirements, it generally stops either party from asking the court for a property settlement over the matters it covers.
A BFA is not only for wealthy couples. Anyone who owns property, has superannuation, runs a business, expects an inheritance, or simply wants clarity about where they stand can benefit from one.
When Can You Make a BFA?
A BFA can be made at three stages of a relationship.
- Before the relationship: often called a prenup, made before marriage or before a de facto relationship begins.
- During the relationship: for couples who are already together and want to document their financial arrangements, often before buying property or starting a business together.
- After separation: to finalise property matters privately instead of applying to the court for consent orders.
Many couples do nothing until separation, when the conversation is hardest. An agreement made while the relationship is stable is usually simpler to negotiate and harder to challenge later.
What Can a BFA Cover?
A BFA can deal with any of the couple's financial resources, including:
- Real estate, including the family home and investment properties
- Superannuation, including how it will be split
- Business interests, company shares and trust assets
- Savings, investments and bank accounts
- Debts and liabilities
- Inheritances and gifts, whether received before or during the relationship
- Spousal maintenance
- Assets acquired in the future, if the agreement is drafted to include them
A BFA cannot decide parenting arrangements for children. Child support is dealt with separately under child support legislation.
What Makes a BFA Legally Binding?
The Family Law Act sets strict requirements (section 90G for married couples and section 90UJ for de facto couples). A BFA is only binding if:
- It is in writing and signed by both parties
- Before signing, each party received independent legal advice about how the agreement affects their rights, and its advantages and disadvantages for them
- Each party's lawyer has signed a statement confirming that advice was given
- A copy of the statement given to one party is provided to the other party or their lawyer
- It has not been terminated or set aside by a court
If these steps are missed, the agreement is not binding, even if both parties signed it willingly. A court can declare it binding only in limited cases where it would be unjust and inequitable not to. An agreement prepared without proper advice can give a false sense of security that leaves someone worse off years later.
Why Full Financial Disclosure Matters
Each party should fully disclose their assets, liabilities, income and financial resources before the agreement is signed, and the agreement should record that this happened. Non disclosure of a material matter can amount to fraud, which is one of the grounds on which a court can set the agreement aside. Complete disclosure protects both parties.
Can a BFA Be Set Aside?
Yes. Under section 90K (married couples) and section 90UM (de facto couples), a court can set aside a BFA on specific grounds, including where:
- It was obtained by fraud, including non disclosure of a material matter
- It was made to defraud or defeat creditors
- It is void, voidable or unenforceable, for example because of duress or undue influence
- A party engaged in unconscionable conduct in making it
- Circumstances have arisen that make it impracticable to carry out
- There has been a material change in circumstances relating to the care, welfare and development of a child of the relationship, and the child or the parent caring for them would suffer hardship if it is not set aside
In Thorne v Kennedy [2017] HCA 49, the High Court set aside agreements signed shortly before and after a wedding. The court found the wife had signed under undue influence and that the husband had engaged in unconscionable conduct, even though she had received independent legal advice warning her against signing. Time pressure, a large imbalance in bargaining power and heavily one sided terms all counted against the agreement.
BFA or Consent Orders?
After separation, couples who agree on a property division can either sign a BFA or apply to the Federal Circuit and Family Court of Australia for consent orders. The main differences are set out below.
| Binding financial agreement | Consent orders | |
|---|---|---|
| When | Before, during or after the relationship | Usually after separation |
| Court involvement | None. The agreement is private | Filed with the court, which must be satisfied the division is just and equitable |
| Legal advice | Independent advice for each party is mandatory | Recommended but not required |
| Fairness | Does not have to be approved as fair | Must be just and equitable |
| Challenge | Can be set aside on the grounds above | Can be varied or set aside only in limited circumstances |
Before a relationship ends, a BFA is the only option. After separation, the right choice depends on the assets involved and how much certainty each party needs.
How Long Does a BFA Take?
With both parties cooperating, a BFA can often be finalised within a few weeks. The usual process is:
- Each party meets their own lawyer to explain their goals and circumstances
- Both parties exchange full financial disclosure
- One lawyer prepares the draft agreement
- The other party's lawyer reviews it and the terms are negotiated
- Each party receives formal advice on the final agreement and signs it
- The lawyers sign their statements of advice, copies are exchanged, and each party keeps a signed agreement
Negotiation, incomplete disclosure, or complex assets such as businesses and trusts can extend the timeline. If the agreement is linked to a wedding, start months ahead so neither party signs under time pressure.
What Happens to a BFA If One Party Dies?
A BFA generally continues to operate after the death of a party and is binding on their estate. Because the agreement and each party's will interact, it is worth reviewing both documents together. A BFA does not replace a will.
Is a BFA Right for You?
A BFA is not necessary for every couple. It is worth considering if:
- You own property or significant assets coming into the relationship
- You have children from a previous relationship
- You own or are building a business
- You expect a significant inheritance
- You and your partner have very different financial circumstances
- You want clarity and peace of mind about where you each stand
The conversation can feel uncomfortable. That is normal. Having it early is almost always easier than having it after something has gone wrong.
What to Do Now
- List the assets, debts, superannuation and expected inheritances each of you would bring to the agreement
- Talk with your partner early, well before any wedding date or joint purchase
- Each book your own lawyer for independent advice
- Gather financial documents so disclosure can be exchanged quickly
- Review your wills alongside the agreement
PCA Perspective
In our experience, the strength of a BFA is decided long before anyone challenges it. Agreements that hold up are signed without time pressure, after full disclosure, with terms both parties can explain in their own words. Because we are a combined law and accounting firm, we can also look at how an agreement treats business interests, trusts and tax outcomes, which are often the assets that matter most.
How Phan Campbell & Associates Can Help
Our family law team in Footscray prepares and reviews binding financial agreements for married and de facto couples across Melbourne. We can prepare your agreement, or give independent advice on an agreement drafted by your partner's lawyer.
We also assist with property settlements after separation, de facto property settlements and consent orders. If you have questions about protecting your financial position, we are happy to have a conversation before you commit to anything.
Frequently Asked Questions About Binding Financial Agreements
1. Is a binding financial agreement the same as a prenup?
A prenup is one type of binding financial agreement. In Australia, the term BFA covers agreements made before a marriage or de facto relationship, during it, or after separation. An agreement made before the relationship is what most people call a prenup.
2. Do we both need separate lawyers?
Yes. Each party must receive independent legal advice from their own lawyer before signing. One lawyer cannot advise both parties. Without that advice and the signed statement from each lawyer, the agreement is not binding.
3. Does a binding financial agreement have to be fair?
Unlike court orders, a BFA does not have to be approved as just and equitable. However, an agreement that is very one sided, or that was signed under pressure, is more exposed to being set aside on grounds such as undue influence or unconscionable conduct.
4. How long does a binding financial agreement take?
With both parties cooperating and financial disclosure ready, a BFA can often be finalised within a few weeks. Negotiation, incomplete disclosure, or complex assets such as businesses and trusts can extend this. If the agreement is linked to a wedding, start early so neither party signs under time pressure.
5. Can we change a BFA after it's been signed?
Yes, if both parties agree. A BFA can be varied by a new agreement or terminated by a termination agreement. The new document must meet the same requirements, including independent legal advice for each party.
6. Does a BFA cover assets acquired after the agreement is signed?
It can, if it is drafted to. A well prepared BFA sets out how future assets, income, inheritances and business growth will be treated. If the agreement is silent, those assets may fall outside it.
7. What happens if we don't have a BFA and we separate?
Without a BFA, property is divided by agreement between the parties, usually formalised through consent orders, or by the court if no agreement is reached. Court proceedings can be lengthy, costly and unpredictable.