Binding Financial Agreement (BFA)

In Australia, what is commonly called a “prenuptial agreement” or “postnuptial agreement” is formally known as a Financial Agreement, also commonly referred to in Chinese as a property agreement, financial agreement or Binding Financial Agreement (BFA).

The Federal Circuit and Family Court has expressly stated that a financial agreement is a contractual document made under the Family Law Act 1975.

Where the agreement is valid and binding, it can oust the court’s jurisdiction to make orders on the parties’ property and financial matters, in whole or in respect of specified financial matters.

One of its core functions is therefore that, provided the legal requirements are met, the parties can deal with property, debts, superannuation and spousal maintenance arising out of the relationship by agreement, without necessarily having to go to court in the future.

A financial agreement is a formal document that can have significant legal consequences for future property rights.

If the agreement genuinely takes effect, it may directly affect the parties’ scope to apply to the court for orders on property and financial issues in the future.

Conversely, if the agreement contains legal defects, it can itself become a source of future disputes.

The Federal Circuit and Family Court’s official guidance repeatedly emphasises that the legal rules governing these agreements are complex, and parties should obtain appropriate legal advice before entering into, or relying on, such an agreement. link

Many people understand these agreements simply as “prenuptial agreements”. In fact, under Australian family law, a financial agreement can exist not only before marriage.

Whether the relationship is a marriage or a de facto relationship, the law permits a financial agreement to be entered into before, during and after the relationship. (Sections 90B, 90C and 90D of the Family Law Act apply to marriages, and sections 90UB, 90UC and 90UD apply to de facto relationships.) This means that a “prenup” is only one common use of a financial agreement, not the only one.

In practice, agreements signed before marriage are often used to plan for future risks, for example:

Agreements entered into after marriage may reflect changes in circumstances, for example:

Agreements entered into after separation or divorce are closer to “the parties have already separated and want to formalise the financial outcome”.

The Federal Circuit and Family Court has explained that a financial agreement can “cover the field”, in the sense that it can deal with the parties’ overall financial relationship.

In practice, however, it can also be limited to specific issues, and is not required to deal with everything in one document. For example, an agreement may deal only with one class of asset, or only with spousal maintenance.

From a practical perspective, financial agreements generally focus on the following core areas:

In its guidance on financial agreements and property orders, the Federal Circuit and Family Court has also identified property arrangements, superannuation and spousal maintenance as the main areas that can be addressed through a financial agreement.

That said, the fact that something “can be written into the agreement” does not mean any drafting will be effective.

Spousal maintenance, in particular, is subject to stricter legal requirements regarding the formulation and conditions for the operation of clauses.

If an agreement attempts to deal with matters beyond the scope permitted by law, or contains overly broad or unworkable clauses, this may also give rise to enforceability disputes later.

This is the most fundamental and most error-prone aspect of a financial agreement.

The Federal Circuit and Family Court has expressly stated that, for marital financial agreements, the binding requirements are set out primarily in section 90G of the Family Law Act 1975.

For de facto relationships, the corresponding provision is section 90UJ.

The court has also emphasised that each party must, before signing, obtain independent legal advice from an Australian lawyer, and this requirement is mandatory. From the court’s published information, several points are essential:

It should be noted that some of the official guidance materials may, in general terms, refer to “legal and financial advice“.

When specifically considering whether a Binding Financial Agreement is legally enforceable, however, the court’s position is clear: before signing, each party must obtain independent legal advice from an Australian-practising lawyer.

In other words, in terms of the formal requirements for a binding agreement, independent legal advice is a clear and central statutory requirement.

Whether the parties also need accounting or tax advice depends on the complexity of the asset structure and the tax issues in the particular case.

Not necessarily. The Federal Circuit and Family Court has expressly stated that, in certain circumstances, the court has power to set aside a financial agreement between the parties.

For marriages, the relevant provision is section 90K; for de facto relationships, it is section 90UM.

For many clients, the question is why some agreements end up causing problems, and how the agreement should be designed to avoid such risks. Common risks in practice include:

While the grounds on which an agreement may be challenged differ from case to case, the Federal Circuit and Family Court’s position is clear: a financial agreement is not automatically watertight simply because it has been signed.

It must withstand subsequent legal scrutiny.

This is a question frequently asked by clients in practice. The Federal Circuit and Family Court generally regards a financial agreement and consent orders as two paths for “formalising financial arrangements”.

Both can be used to fix in place an outcome the parties have already negotiated, but they are fundamentally different in legal nature.

A financial agreement is essentially a contract between the parties under the Family Law Act 1975. Consent orders involve the parties submitting their agreement to the court, with the court formally making orders.

It is important to note that the court will only approve and make these orders if the financial arrangement is “just and equitable“.

A financial agreement is closer to “the parties agreeing by way of contract”, while consent orders are closer to “the parties agreeing, and the court reviewing and making orders”. Several key differences flow from this in practice:

Which path is appropriate is not simply a matter of “which is more formal” or “which is safer”.

It needs to be assessed in light of the specific circumstances: the parties’ current relationship, the complexity of the asset structure, the scope of issues to be dealt with and the particular risks each party is most concerned about.

In some cases, consent orders are better suited to securing court confirmation and enforceability. In others, a financial agreement may be more flexible and better suited to the parties’ arrangements.

In some situations, it is not appropriate to rush into a financial agreement at an early stage; it is better first to deal with asset disclosure and the overall plan, and then decide on the form.

Many people assume that, since it is a “prenuptial” agreement, it should be signed as close to the wedding as possible.

From a risk management perspective, the more reliable approach is generally not to “rush to complete it” close to the wedding, but to start preparing as early as possible.

In practice, disputes about financial agreements typically arise not because the parties did not agree, but because of problems in the signing process itself.

For example, the timeframe was too tight, discussions were inadequate, disclosure was incomplete, or independent legal advice was a formality only.

In particular, where the wedding is imminent and family arrangements have largely been finalised, a party who signs under clear pressure is more likely to give rise to subsequent disputes over whether the agreement was entered into on a “genuinely voluntary” basis.

If the parties are seriously considering a prenuptial financial agreement, it is generally more prudent to start early rather than finish late.

The point of starting early is not to “sign as quickly as possible”, but to allow sufficient space for the following key steps:

From this perspective, “starting earlier” is fundamentally about reducing the risk that the agreement will be challenged in the future.

No. The law expressly permits the parties to enter into a financial agreement during the marriage, that is, a postnuptial agreement.

The Federal Circuit and Family Court’s Financial Agreements page expressly states that financial agreements in a marriage can be made at different stages: before marriage, during the marriage and after divorce.

The same structure applies to de facto relationships. For many families, a postnuptial agreement is in fact closer to actual needs. Many risks are not fully apparent before marriage and only emerge during it.

For example, one party’s family later provides substantial financial assistance for a property purchase, one party joins the family business, the parties start investing jointly, or one party intends to stop working to care for the children, and the parties want to clarify the future financial arrangement.

In these circumstances, a postnuptial agreement does not signal that the relationship is “in trouble”. It can be a proactive way of managing risk while the parties are still able to communicate.

Yes. Many people assume that financial agreements are only for “preventive” arrangements before the relationship begins. They can also be used after a relationship ends to formalise an agreed financial outcome.

After a marriage or a de facto relationship breaks down, the corresponding type of financial agreement can still be used to deal with property settlement, superannuation and spousal maintenance.

However, choosing a financial agreement after separation, as opposed to consent orders, has different legal effects and risk profiles.

For cases involving full disclosure, limited dispute and both parties understanding and accepting the result, a financial agreement may be a workable path.

Where there is significant imbalance, inadequate disclosure, difficulty in enforcement, or where the parties prefer the stability and enforceability of court orders, consent orders may be more suitable.

Not every couple needs a financial agreement, and not every family with assets is suited to one. The cases that require careful assessment are typically those where financial risk would rapidly amplify if the relationship changed.

For example: one party has significant pre-relationship assets, a family trust, company interests or inheritance arrangements; one party’s family is about to inject a substantial sum into a property purchase and wishes to clarify the future treatment; one party clearly carries more future caring responsibility, or there is a wide gap in income or asset structure; or the relationship is already strained or breaking down and, while the parties want to finalise things quickly, there is significant uncertainty about disclosure, fairness and enforcement.

In these situations, a financial agreement is not impossible, but it requires careful assessment of content, process and subsequent risks.

If the agreement is signed only “to get a document done quickly”, risks that could otherwise be managed may become future points of dispute.

For a document of this kind, the role of a lawyer is generally not just to “tweak a few words”. It begins from the outset, assessing whether the agreement is appropriate, whether it is safe and whether it is worth signing.

The Federal Circuit and Family Court has expressly required that each party obtain independent legal advice before signing a financial agreement.

This itself indicates that it is not a document suited to template-based or self-drafted approaches based on experience.

More importantly, many problems in practice do not arise from “poorly drafted clauses”, but from inadequate up-front assessment.

If these foundational issues are not properly addressed, even a document that appears complete in form may give rise to risks later. For example:

If these questions are not properly analysed at the outset, even careful subsequent drafting may simply lock potential risks into a more formal document.

From practical experience, where the following factors are present, it is generally advisable to obtain legal advice early, rather than dealing with the signing process only as the documents near completion:

In these situations, the value of a lawyer often lies in early assessment and structural design, not only in drafting or amending the document.

In handling prenuptial and postnuptial financial agreements, we generally do not begin with “producing a template”. We begin by understanding what problem the agreement is intended to address.

For some clients, the focus is on protecting pre-relationship assets; for others, it is on responding to concerns over family contributions to a property purchase; for others, it is on formalising the financial outcome already agreed after separation and minimising the risk of further disputes.

On that basis, we help clients map out the asset structure, identify information that needs to be disclosed, analyse which content is suitable for inclusion in the agreement and which is not, and provide recommendations on the choice between a financial agreement and consent orders.

In drafting and reviewing the document, we pay particular attention to whether the clauses are clear, consistent with the client’s objectives, whether there is obvious imbalance or enforcement risk, and whether the signing process itself is sufficiently robust.

What ultimately determines the quality of a financial agreement is not the number of pages. It is the accuracy of the up-front assessment, the completeness of the information and the robustness of the process.

These are the core issues we consistently focus on in cases of this kind.

The NS Legal family law team has long handled divorce, separation and related financial arrangements.

We have detailed and practical experience with prenuptial and postnuptial financial agreements, a class of matter that is technically demanding and risk-laden but is often misunderstood as “just signing a document first”.

We understand that, for many clients, entering into such an agreement is not a signal that “the relationship is bad”.

It is about clarifying important financial boundaries in advance, identifying risks clearly and reducing future uncertainty. In handling these matters, we do not stop at “producing an agreement”.

We pay greater attention to why the agreement is being made, whether it is appropriate, and at what level of detail it actually has value.

For cases involving pre-relationship assets, family financial assistance, family businesses, trust structures, cross-border property or post-separation formalisation, we combine the stage of the relationship, the financial structure and the client’s practical objectives, help the client identify the issues that truly matter, and then progress drafting, review and signing on that basis.

If you are considering a prenuptial or postnuptial agreement, or want to understand whether a financial agreement or another path is more appropriate for your current arrangement, please contact the NS Legal family law team.

We will provide clear, practical and actionable advice based on your specific circumstances.