Before answering this question, we need to clear up one thing first: why can a child’s spouse share in a property that the child’s parents bought for them?

This comes down to two key points:

1. Australia does not distinguish between pre-marital and post-marital property. Once you are married, or once you meet the conditions of a de facto relationship (cohabitation), all assets — whether held in an individual name or jointly, whether in Australia or overseas — become joint property.

For example:

If a husband purchased a property outright in his own name before marriage, then later married his wife without making any change to the property registration, and the marriage subsequently breaks down, that property bought before the marriage must still be divided. Even though the property was acquired before the marriage began, it is still considered joint matrimonial property.

2. Money that parents give their children, or items that parents pay for on their children’s behalf, are by default treated as gifts to the children. In plain terms: when parents buy a house for their child, it is the equivalent of the parents giving the child a house as a gift, and ownership naturally belongs to the child.

Putting these two points together: the house belongs to the child, and once that child is married, the house becomes joint property shared with their spouse. The moment they divorce, the house is drawn into the asset pool for division.

So we come back to the original question: if you bought a property before getting married, what can you do to stop your spouse from taking a share of it when the relationship ends?

Corresponding to the two points above, here are the two approaches:

1. The couple signs a property settlement agreement

The couple can reach a consensus and, with the professional advice of each of their lawyers, sign an agreement setting out how their property will be divided. The agreement can state clearly who the house belongs to.

When people hear “property agreement” they often automatically add the word “pre-nuptial” in front of it — what we commonly call a pre-nuptial agreement. In reality, a property agreement can be made not only before marriage, but also during the marriage or after it has ended. It is not the case that a couple can only agree on how future property will be divided before entering the marriage. During the marriage, or after it has ended, the parties can agree on how property is to be divided as long as they reach consensus. It is important to note that if the property agreement is made after the marriage has ended, it must be completed within 12 months of the end of the marriage.

A property agreement can cover a wide range of matters. What can actually be included is highly complex, especially for parties with complicated assets, and requires targeted analysis from an experienced family lawyer. In addition to real estate, vehicles and ordinary financial assets, here are a few relatively special types of assets for reference:

(1) Assets inherited from a family trust;

(2) Liabilities, such as mortgage loans;

(3) Insurance policies;

(4) Shares;

(5) Spousal maintenance;

(6) Bank accounts;

(7) Estates, and so on

That said, there is no single comprehensive, exhaustive list of exactly what can be included in a property agreement. For special assets or unusual circumstances in particular, make sure to seek legal advice in advance.

Note: a property settlement agreement requires each party to have their own legal representative, and must be signed in the presence of both lawyers. A valid property agreement must strictly comply with the requirements of the Family Law Act — in other words, the parties cannot independently sign a legally effective property agreement without lawyers involved.

2. Parents and child sign a loan agreement

Put simply: the parents and the child sign an agreement spelling out clearly that the money for buying the house is a loan from the parents to the child that must be repaid.

A written loan agreement between parents and child, together with a restriction notice on the property title, can serve as evidence that the purchase money was a loan rather than a gift. It is common for parents or children to complete the transfer and the property purchase first, and only consult a lawyer about retroactively adding a loan agreement once the marriage starts running into trouble. In that situation, the nature of the funds is likely to be challenged. If the sum parents are putting toward the child’s home purchase is significant, a loan agreement should be documented as early as possible, rather than waiting until problems arise in the marriage to think about protecting one’s interests.

A loan agreement is not just a simple IOU — it has to set out many specific terms clearly: whether the loan will be repaid in instalments, the latest repayment date, the interest rate, and so on. Any shortfall can lead a court to find the agreement invalid. So be aware:

– A loan agreement only needs the signatures of the parents and the child, but to guarantee its validity you should have a lawyer draft it for you.

– If the house appreciates in value, the appreciation is usually not covered by the loan agreement — meaning the house can still end up in the joint-property pool, but the side whose parents contributed the funds will be at an advantage.

In short, the agreement must meet the formal requirements for signing a loan agreement; you cannot simplify its terms or signing procedure just because it is between parents and child. Before signing a loan agreement, always consult a qualified lawyer to ensure the agreement is valid — otherwise, a self-drafted loan agreement may well fail to safeguard your interests.

Some may also ask

What if the house is registered in the parents’ names — surely that is enough?

This is also a very complex question. If the couple later pay off the mortgage on the house, then however much each of them contributed counts as their respective financial contribution to the marriage. When the court divides the property, it will take those contributions into account, which will affect the proportion in which assets are divided.

Finally

We believe parents contribute toward buying property for their children out of a genuine hope that the young couple will feel less pressure and enjoy a happier, smoother life together. But life is unpredictable, and no one in a marriage can guarantee that things will always go as planned. Over the long term, signing an agreement is the safest, most protective option for the individual and the couple alike. Love matters — but reason is just as important. Our advice is to consult a qualified lawyer early, before a crisis arises, and minimise your risk.