A financial agreement, as outlined in the Family Law Act, is a legally binding contract between partners that determines how financial matters will be handled in the event of a separation.
It allows couples to decide how their assets, debts, and financial responsibilities will be divided without court intervention.
Financial agreements apply to de facto relationships, marriages, and even after a relationship has ended.
These agreements are commonly known as Binding Financial Agreements (BFAs) and serve as an effective way to safeguard assets and prevent disputes in the future.
What Is a Financial Agreement and How Does It Work Under Australian Law?
A financial agreement is a legal contract between two people in a relationship that details how assets, finances, and property will be divided in case of separation.
These agreements are recognised under the Family Law Act 1975 and can be created before, during, or after a relationship.
The main purpose of a financial agreement is to avoid court proceedings by setting out financial arrangements in advance. These agreements can cover:
- Property division
- Superannuation
- Spousal maintenance
- Debt responsibilities
Once signed, financial agreements prevent either party from making claims against each other’s property in the future, as long as the agreement is valid and legally binding.
Also Read: Legal Guide to Binding Financial Agreements in Brisbane
When Should You Consider a Binding Financial Agreement (BFA) in a Relationship?
A Binding Financial Agreement (BFA) can be considered at different stages of a relationship:
1. Before Marriage or Moving in Together (Prenuptial Agreement)
If you have significant assets or own a business, you may wish to protect them before entering a committed relationship. A prenuptial agreement ensures that your finances remain secure.
2. During Marriage or De Facto Relationship
Couples who are already married or in a de facto relationship may decide to formalise financial arrangements to clarify expectations and protect assets.
3. After Separation or Divorce
A financial agreement can also be made after separation to finalise financial matters and avoid court proceedings. This helps both parties move forward without financial disputes.
Are Financial Agreements Legally Enforceable in Australia?
Yes, financial agreements are legally enforceable in Australia if they meet the requirements set out in the Family Law Act 1975. However, to ensure enforceability, the agreement must:
- Be in writing and signed by both parties
- Include a statement from each party’s lawyer confirming that independent legal advice was provided
- Be made without fraud, coercion, or undue influence
- Provide full disclosure of assets and liabilities
If these conditions are not met, the court can declare the agreement invalid.
Additionally, courts can set aside a financial agreement if there has been fraud, non-disclosure, or a significant change in circumstances (such as hardship for a child).
How Can a Financial Agreement Protect My Assets and Interests?
A financial agreement provides certainty and financial protection by:
1. Protecting Personal and Business Assets
If you own significant assets or a business, a financial agreement ensures they remain yours, even if the relationship ends.
2. Avoiding Lengthy and Costly Legal Disputes
Court battles over property settlements can be expensive and emotionally draining. A financial agreement prevents disputes by clearly outlining asset division.
3. Providing Financial Security for Children from Previous Relationships
If you have children from a previous relationship, a financial agreement can ensure that their inheritance remains protected.
4. Defining Spousal Maintenance Obligations
A financial agreement can specify whether one partner will provide financial support to the other after separation, reducing uncertainty.
What Are the Common Mistakes to Avoid When Drafting a Financial Agreement?
To ensure your financial agreement is valid and enforceable, avoid these common mistakes:
1. Failing to Seek Independent Legal Advice
Both parties must receive legal advice from separate lawyers. Without it, the agreement can be challenged in court.
2. Not Disclosing All Assets and Liabilities
If either party hides financial information, the agreement may be invalid. Full disclosure is crucial.
3. Signing Under Pressure or Duress
An agreement signed under pressure (e.g., days before a wedding) may be overturned by the court. It must be entered into freely.
4. Using a Poorly Drafted or Generic Agreement
Templates found online may not comply with Australian law. A lawyer should draft the agreement to meet legal standards.
5. Not Updating the Agreement When Circumstances Change
Life events such as having children, inheriting assets, or financial shifts may require updates to the agreement.
Safeguard Your Future with Expert Legal Advice
A financial agreement under the Family Law Act is an essential tool for protecting your financial future.
Whether you’re entering a new relationship or dealing with a separation, having a well-drafted agreement can save time, stress, and legal costs.
For expert legal assistance in drafting or reviewing a financial agreement, Ipswich Family Lawyers can help.
Our team specialises in family law and ensures that your agreement is legally binding and tailored to your needs. Contact us today for a confidential consultation.
