What Is a Binding Financial Agreement?

Introduction

A Binding Financial Agreement — often called a BFA — is a private legal agreement between spouses or de facto partners about how property, finances and, in some cases, maintenance will be dealt with if their relationship breaks down.

Many people search for terms like “prenup in Australia” or “financial agreement after separation” when they want certainty about their financial future. In Australian family law, a Binding Financial Agreement can be a useful risk-management tool, but it is also a technical document that must comply with strict legal requirements.

A BFA is not suitable for every couple. It can provide clarity and protection, but it can also be challenged if it is poorly prepared, signed under pressure, or does not properly address changing circumstances.

This article explains what a Binding Financial Agreement is, how it works in Australia, what it can and cannot cover, and when legal advice is particularly important.

This article provides general information only and is not legal advice.

What Is a Binding Financial Agreement in Australia?

A Binding Financial Agreement is a written agreement made under the Family Law Act 1975 (Cth). It allows a couple to set out in advance, or after separation, how their financial matters will be handled.

In simple terms, a BFA can operate like a contract that deals with:

• property division

• assets and liabilities

• financial resources

• spousal maintenance or de facto partner maintenance

A BFA is commonly used by:

• couples entering a marriage or de facto relationship with unequal assets

• people seeking to protect family wealth, businesses or inheritances

• separated couples who want to formalise a financial settlement without consent orders

• couples wanting greater certainty about what happens if they separate

Although people often describe BFAs as “prenups”, that term is only part of the picture. In Australia, a financial agreement can be made before, during, or after a marriage or de facto relationship.

How a Binding Financial Agreement Works

A Binding Financial Agreement allows parties to make their own arrangements rather than leaving financial issues to be determined later by the Court.

If valid and enforceable, a BFA can reduce or remove the Court’s role in deciding property settlement and maintenance issues between the parties.

When Can a BFA Be Made?

Under the Family Law Act, financial agreements can be made:

For married couples

• before marriage  

• during marriage  

• after divorce

For de facto couples

• before a de facto relationship starts

• during a de facto relationship

• after the breakdown of a de facto relationship

This flexibility is one reason Binding Financial Agreements are widely used in family law planning.

What Can a Binding Financial Agreement Cover?

A properly drafted BFA can deal with a broad range of financial matters, including:

• who retains property brought into the relationship

• how jointly acquired assets will be divided

• responsibility for debts

• treatment of future inheritances

• division of businesses, trusts or investments

• spousal maintenance or de facto partner maintenance

For example, a BFA might state that:

• each party keeps the assets they owned before the relationship

• a jointly purchased home will be sold and the proceeds divided in a particular way

• one party will make a lump sum payment if separation occurs

• future inheritances remain the separate property of the recipient

What a BFA Cannot Properly Resolve

A Binding Financial Agreement is not a complete solution to every family law issue.

It does not replace arrangements dealing with:

• parenting disputes

• who children live with

• time arrangements for children

• parenting orders

It is also important to be careful around child support, which is governed by a separate legislative framework. A BFA is not the usual document used to conclusively determine child support obligations.

Relevant Australian Law

Binding Financial Agreements are governed by the Family Law Act 1975 (Cth).

The relevant provisions depend on whether the parties are married or in a de facto relationship.

Married couples

Financial agreements are made under Part VIIIA of the Act, including:

• s 90B – before marriage

• s 90C – during marriage

• s 90D – after divorce

For a marital financial agreement to be binding, the formal requirements in s 90G must be satisfied.

De facto couples

Financial agreements are made under Part VIIIAB of the Act, including:

• s 90UB – before a de facto relationship

• s 90UC – during a de facto relationship

• s 90UD – after breakdown of a de facto relationship

For a de facto financial agreement to be binding, the formal requirements in s 90UJ must be met.

Important point for de facto couples who later marry

If parties make a de facto financial agreement and later marry each other, the Part VIIIAB agreement ceases to be binding by operation of law. If they want ongoing protection after marriage, a new agreement under the marriage provisions is generally required.

What Makes a Binding Financial Agreement Legally Binding?

This is where many BFAs succeed or fail.

To be enforceable, a BFA must comply with strict statutory requirements. While the exact provisions differ depending on whether the agreement is for a married or de facto couple, the key requirements usually include:

• the agreement must be in writing

• it must be signed by both parties

• each party must receive independent legal advice

• each party’s lawyer must provide the required signed statement or certificate

• the agreement must not have been terminated or set aside

The independent legal advice requirement is critical. Each party must receive advice about:

• the effect of the agreement on their rights

• the advantages and disadvantages of making the agreement

A BFA prepared casually, copied from an online template, or signed without proper advice may be at significant risk of being found not binding.

Can a Binding Financial Agreement Be Set Aside?

Yes. A BFA is not automatically “bulletproof”.

Even where an agreement appears valid on its face, the Court may set it aside in certain circumstances. The relevant provisions include s 90K for married couples and s 90UM for de facto couples.

Common grounds include:

• fraud, including non-disclosure of important financial matters

• duress or undue pressure

• unconscionable conduct

• impracticability

• a material change in circumstances relating to a child, where hardship would result

• the agreement being void, voidable or unenforceable under general contract principles

This is why careful drafting, full disclosure, and proper advice are so important.

Practical Examples

Example 1: Protecting pre-relationship assets

A person enters a second marriage owning a home, substantial savings and a family trust. A Binding Financial Agreement may provide that those assets remain that person’s separate property if separation occurs.

Example 2: Business protection

One partner operates a successful business before the relationship begins. A BFA may set out that the business and any increase tied to it remain quarantined from future claims, subject to proper drafting and future circumstances.

Example 3: Post-separation settlement

A separated couple agrees how to divide their property and wishes to formalise the arrangement privately. A financial agreement may be used instead of consent orders, although the suitability of that approach depends on the circumstances.

Example 4: De facto relationship followed by marriage

A couple signs a BFA while in a de facto relationship. They later marry. Unless they enter into a new agreement under the marriage provisions, the earlier de facto agreement will not continue as a binding Part VIIIAB financial agreement after marriage.

Common Mistakes and Misconceptions

“A BFA is just a prenup.”

Not quite. A Binding Financial Agreement can be made before, during, or after a relationship.

“If both people sign it, it must be valid.”

No. Signature alone is not enough. Strict statutory requirements apply.

“A BFA can deal with everything after separation.”

No. It is primarily about financial matters, not parenting arrangements.

“A BFA can never be challenged.”

Incorrect. Courts can set aside financial agreements in certain circumstances.

“Online templates are enough.”

Usually risky. A BFA is a technical legal instrument, and poor drafting can undermine its enforceability. You must have a lawyer sign the certificate of independent legal advice.

Steps a Person Should Take Before Signing a BFA

Anyone considering a Binding Financial Agreement should approach it carefully.

1. Identify the purpose of the agreement

Be clear about what the agreement is meant to achieve, such as:

• protecting existing assets

• dealing with a future inheritance

• providing certainty for children from an earlier relationship

• recording a negotiated settlement after separation

2. Make full financial disclosure

A party should disclose assets, liabilities, income and relevant financial resources. Non-disclosure can create serious enforceability risks.

3. Consider future life changes

A BFA should be drafted with foreseeable changes in mind, such as:

• children

• inheritances

• illness

• career breaks

• major asset growth

4. Obtain independent legal advice

Each party must have separate legal advice from their own lawyer.

5. Review whether another option is better

In some cases, consent orders may be more appropriate than a financial agreement, particularly after separation.

When to Speak to a Family Lawyer

Tailored legal advice is especially important if:

• one party has significantly greater assets than the other

• there is a business, trust, company or family wealth structure

• one party expects to receive an inheritance

• the relationship involves children or plans for children

• the parties are de facto and planning to marry

• the agreement is being proposed close to a wedding or move-in date

• the parties have already separated and want a binding settlement

Timing and process matter. Agreements entered into under pressure, or without proper disclosure and advice, are more vulnerable to later challenge.

FAQ: Binding Financial Agreements in Australia

Is a Binding Financial Agreement the same as a prenup?

A prenup is one type of Binding Financial Agreement, but BFAs can also be made during a relationship or after separation.

Do both parties need separate lawyers for a BFA?

Yes. Independent legal advice is a core requirement for a financial agreement to be binding.

Can a Binding Financial Agreement cover spousal maintenance?

Yes, in many cases it can deal with spousal maintenance or de facto partner maintenance, subject to the Act and proper drafting.

Can a BFA be overturned in court?

Yes. A court may set aside a BFA on grounds such as fraud, duress, unconscionable conduct, impracticability, or hardship relating to children.

What happens to a de facto BFA if the couple later marries?

A Part VIIIAB de facto financial agreement ceases to be binding if the parties later marry each other. A new agreement under the marriage provisions may then be needed.

Conclusion

A Binding Financial Agreement can be an effective way for couples in Australia to manage financial risk and create certainty about property division and maintenance. It is often used before a relationship, during a relationship, or after separation to formalise financial arrangements outside of court.

However, a BFA is only as strong as its drafting, disclosure and compliance with the Family Law Act. Because these agreements are technical and can be challenged, they should be prepared carefully and with proper legal advice.

Contact the Firm

If you need guidance about a Binding Financial Agreement, prenup, de facto financial agreement, post-separation property agreement, or protecting assets before marriage, the firm’s family law team can assist with clear, practical advice tailored to your circumstances.

This publication is general information only and does not constitute legal advice. Liability limited by a scheme approved under Professional Standards Legislation.