At a Glance
- Binding Financial Agreements (BFAs) allow couples to decide how assets and liabilities will be split if their relationship ends
- Recognised under the Family Law Act 1975 (Cth), BFAs apply to both married and de facto couples
- For an agreement to be binding, both parties must receive independent legal advice
- Certain legal formalities must be strictly followed, or the agreement can be set aside
- BFAs can cover property, spousal maintenance, and superannuation
- While highly effective, BFAs can be challenged on grounds such as fraud, unconscionable conduct, or material non-disclosure
Understanding Binding Financial Agreements
A Binding Financial Agreement (BFA) is not a post-breakup negotiation tool, but a proactive legal strategy. It allows couples to 'contract out' of the default property settlement principles under the Family Law Act, which typically aim for a just and equitable division of assets after separation. Instead of leaving the future to judicial discretion, couples use BFAs to set their own rules, whether before marriage (commonly called a “pre-nup”), during a relationship, or after separation.
In Thorne v Kennedy (2017) , the High Court confirmed that Part VIIIA of the Family Law Act 1975 allows couples, where the statutory requirements are met, to enter into binding financial agreements to deal with the financial consequences of a relationship breakdown in advance. The purpose of this legislative framework is to give parties greater certainty and autonomy over their financial affairs and, in appropriate cases, to reduce the need for court involvement in property disputes.
At the same time, the Court made clear that an agreement’s enforceability depends not only on technical compliance, such as each party receiving independent legal advice, but also on whether the agreement was entered into in a fair and genuine manner. Where a financial agreement is affected by undue influence, unconscionable conduct, or other recognised vitiating factors, the court retains the power to set it aside under the Family Law Act and equitable principles.
But enforceability is not automatic. The Family Law Act requires four strict conditions to be met:
- The agreement must be in writing.
- Each party must sign the agreement voluntarily.
- Each party must receive independent legal advice before signing.
- Each party’s lawyer must sign a certificate confirming that legal advice was given.
If any of these steps are missing, the agreement may be unenforceable, no matter how clear the couple’s intentions were.
What Can a BFA Cover?
BFAs are flexible and can address a range of financial matters including:
- How property and assets will be divided
- Ownership of real estate, investments, and businesses
- Treatment of debts and liabilities
- Spousal maintenance obligations
- Superannuation entitlements
They can also include clauses about future assets, such as inheritances, gifts, or income from a growing business. For example, a doctor entering a second marriage might use a BFA to ensure that assets accumulated during their medical career remain protected for children from a prior relationship.
Importantly, BFAs cannot cover parenting arrangements or child support, these matters always remain subject to the court’s view of what is in the child’s best interests.
Real-Life Scenarios: When BFAs Make a Difference
In Thorne v Kennedy [2017], the High Court considered the validity of a pre-nuptial and post-nuptial financial agreement. The husband was a wealthy property developer, while the wife was from overseas and was financially and residually dependent in Australia, placing her in a significantly weaker position.
Although the wife received independent legal advice before signing the agreements, they were signed shortly before the wedding, under significant time pressure and with little genuine opportunity to negotiate. The terms of the agreements were also clearly unfavourable to her. The wife later challenged their validity.
The High Court ultimately held that the financial agreements could be set aside. The Court explained that an agreement’s enforceability depends not only on meeting formal legal requirements, such as independent legal advice, but also on whether it was entered into fairly and freely. Where an agreement is signed in circumstances of clear imbalance or undue pressure, the court may overturn it, even if it appears legally compliant on its face.
Common Grounds for Challenging a BFA
Despite best efforts, some BFAs are later contested in court. Common grounds include:
- Non-disclosure of assets: One party fails to reveal property, trusts, or offshore accounts
- Lack of legal advice: A party signs without proper legal representation
- Unconscionable conduct: One party was pressured into signing under duress
- Fraud or misrepresentation: False statements about financial position or intentions
- Significant change in circumstances: Particularly involving children, illness, or disability
Key Takeaways
- BFAs are legal under Australian law and apply to both married and de facto couples
- To be binding, independent legal advice from separate solicitors is mandatory
- Full financial disclosure strengthens enforceability, even if not strictly required
- Agreements can be made before, during, or after a relationship
- Courts may set aside BFAs where there is fraud, duress, or significant unfairness
Frequently Asked Questions
Can a pre-nuptial agreement protect my inheritance?
Yes. A properly drafted BFA can ensure that inheritances or family gifts remain the sole property of the recipient, protecting them from property claims after separation.
Do both parties need a lawyer?
Yes. For the agreement to be binding, both individuals must receive independent legal advice from separate lawyers, who then sign legal certificates.
Can BFAs cover superannuation?
Yes. Superannuation interests can be divided under Australia’s family law framework through a binding financial agreement or a court order. Any superannuation split must also comply with the relevant superannuation legislation and the rules of the particular superannuation fund.
Can you change a BFA later?
Yes. Couples can enter into a new BFA at any time to replace or amend an existing one, provided all legal requirements are met again.
Can a BFA be overturned by a court?
Yes. While BFAs are designed to be final, courts retain the power to set them aside on specific grounds, such as fraud, lack of disclosure, or hardship due to a child’s needs.
How We Can Help
We assist clients in all stages of relationship planning and separation, offering practical and legally sound advice on financial agreements. Our services include:
- Drafting and reviewing BFAs for pre-marriage, during relationship, or post-separation
- Ensuring compliance with the Family Law Act’s strict formalities
- Advising on disclosure of assets, including trusts and complex ownership structures
- Representing clients in disputes where a BFA is challenged
- Coordinating with financial planners and accountants for holistic estate planning
We focus on creating agreements that are not only legally robust but also respectful of the personal and emotional dimensions of relationships. Early planning often prevents costly and stressful litigation later.
