What is a Binding Financial Agreement?

A Binding Financial Agreement (BFA) is a private contract between two people that formalises how a couple’s property, assets, superannuation and liabilities will be divided in the event of a breakdown of a marriage or a de facto relationship. Once parties enter into a BFA, they give up their rights under the Family Law Act (FLA) for the Family Court to determine any or all property and financial matters should their relationship end.

 Couples can enter into a BFA:

  • Before getting married (a ‘pre-nuptial agreement’) or before entering into a de facto relationship;
  • While married or during a de facto relationship;
  • During a separation but before filing for a divorce; or
  • After a divorce within twelve months of an order of divorce.

Requirements for a Binding BFAs

  • The Agreement is in writing and signed by both parties.
  • Before signing the Agreement, each party was provided with independent legal advice about the effect of the Agreement on their rights and the advantages and disadvantages.
  • After signing the Agreement, each party was provided with a signed statement by their lawyer confirming that advice was provided.
  • Signed copies of the two lawyers’ statements are exchanged between the parties.
  • The Agreement has not been terminated or has not been set aside by a court. and
  • Includes a separation declaration unless the agreement is signed post-divorce.

For a BFA to be legal and binding, it must comply with the strict formalities set out in the Family Law Act, which includes that each party must enter the BFA of their own free will and be fully informed.

Can a court set aside Binding Financial Agreements?

There are certain circumstances set out in the Family Law Act where a Court may set aside a Binding Financial Agreement. These include:

  • where the Agreement has been obtained by fraudulent means, including material non-disclosure;
  • a party to the agreement entered into the Agreement for the purpose of defrauding or defeating a creditor;
  • the Agreement is void or unenforceable (e.g. the BFA was not prepared properly and does not comply with the legislative requirements set out in section 90G or section 90UJ);
  • Since the making of the Agreement, there has been a change in circumstances relating to a child, and it would result in hardship for the child or their carer if the Agreement is not set aside.
  • circumstances have arisen since the agreement was made which make it impossible or impracticable for the Agreement to be carried out;
  • a party’s conduct in the making of the Agreement was, in all the circumstances, unconscionable;
  • a “payment flag” is operating on a superannuation interest covered by the Agreement and there is no reasonable likelihood that the operation of the flag will be terminated by a “flag lifting” under that part; or
  • the Agreement covers at least one superannuation interest that is an “unsplittable interest”.

It’s important to bear in mind that BFAs are complex contracts and require specialised family law advice. You must ensure that you retain as lawyer who is specialise in Family Law and have experience in drafting BFAs.