Binding Financial Agreements in Australia: How Prenups and Separation Agreements Work

A binding financial agreement (BFA) is a written contract under the Family Law Act 1975 (Cth) that sets out how property, super and maintenance are divided if a relationship ends. Couples can make one before, during or after a marriage or de facto relationship. It is binding only if each person receives independent legal advice and the requirements are met.

If you are about to marry, already married, living in a de facto relationship or separating, you probably want one thing: certainty. Who keeps the house? What happens to super, the business, or an inheritance you expect from your parents? A BFA is one of the few tools Australian law gives you to answer those questions privately and in advance.

The catch is that a BFA is only as strong as the care taken to prepare it. Many fail, and they usually fail because they were rushed, copied from a template or signed too close to a wedding. This guide explains how BFAs work, what they can cover, when they are set aside and how to get one right.

This article is general information only and is not legal advice. Your circumstances, and the law in your state or territory, will affect your options. Speak to a lawyer before you act.

Key Takeaways

• A BFA can be made before a marriage or de facto relationship (a prenuptial agreement), during it, or after it ends.
• It can cover property, superannuation, spousal maintenance, business interests and expected inheritances, but it cannot lock in parenting arrangements.
• Under s 90G, a BFA must be in writing, signed by both parties, and backed by independent legal advice and signed statements from each lawyer.
• A court can set a BFA aside under s 90K for reasons including fraud, non-disclosure, unconscionable conduct and certain changes involving children.
• Unlike consent orders, a BFA does not need court approval, which makes it flexible but also means nobody checks it at the time it is signed.
• Your BFA and your will should be prepared together so they do not contradict each other.

Summary Table: Types of Binding Financial Agreement

Source: Family Law Act 1975 (Cth), Federal Register of Legislation

Type of agreement	When it is made	Main provisions	Typical use
Prenuptial agreement	Before the marriage	s 90B	Protecting existing assets, family wealth or a business
During marriage	While married, including after separation but before divorce	s 90C	Recording a new arrangement, or settling property on separation
After divorce	After a divorce order	s 90D	Finalising property matters once divorced
De facto agreement	Before, during or after a de facto relationship	Part VIIIAB (including ss 90UB and 90UC)	The same purposes, for unmarried couples

What Is a Binding Financial Agreement?

A binding financial agreement, often called a BFA, is a private contract between two people that decides how their property and financial resources are divided if the relationship ends. Made under the Family Law Act 1975 (Cth), it can replace a court-ordered property settlement, provided it meets strict legal requirements.

Most people know BFAs as prenups, but the term covers more than that. The Act provides for agreements made at three points in a marriage, and a parallel set of rules for de facto couples. The legal weight is the same in each case. What changes is the timing and the purpose.

Before marriage: the prenuptial agreement (s 90B)

What Australians call a prenuptial agreement is a BFA made in contemplation of marriage under s 90B. It takes effect only if the marriage goes ahead. If the wedding is called off, the agreement does not operate.

Prenups are most common where one partner brings significantly more assets, owns a business, expects an inheritance, or has children from an earlier relationship. They are also common for second marriages, where each person wants to protect what they have built and make sure their children are looked after.

During marriage (s 90C)

A BFA made during the marriage under s 90C is sometimes called a postnuptial agreement. Couples use it when circumstances change: one starts a business, someone receives an inheritance, or the couple reconcile after a difficult period and want clear ground rules.

This section also covers couples who have separated but are not yet divorced. Many separation agreements are made under s 90C, because the divorce application cannot be filed until the parties have been separated for at least 12 months.

After divorce (s 90D)

A s 90D agreement is made after a divorce order. It suits people who divorced first and are now settling their financial affairs privately instead of going to court. Time limits for court proceedings still matter here, and we cover them below.

What Can a Binding Financial Agreement Cover?

A BFA can deal with property, superannuation, spousal maintenance, business interests, gifts and inheritances, and financial resources you expect to receive in future. It cannot lock in parenting arrangements, and it cannot remove the court's concern for children's welfare. Scope is a drafting choice, which is why precision matters.

Property and financial resources

Your agreement can set out who keeps what: the family home, investment properties, savings, shares, vehicles and debts. It can also record that certain assets stay separate, such as property owned before the relationship or gifts from family. It can even fix a formula for dividing assets, instead of listing each one.

A good agreement is realistic about change. Assets grow, businesses are sold and homes are renovated. An agreement that only lists what you own today may not work in ten years.

Superannuation

Super can be dealt with in a BFA, including by splitting a member's interest between the parties. This is more technical than it looks. Super funds must give effect to the agreement, and each fund has its own rules and paperwork. An agreement that promises a split the fund cannot implement causes real problems later.

Spousal maintenance

A BFA can address whether one party will pay maintenance to the other. If you want to exclude future maintenance claims, the agreement must deal with maintenance expressly and in the way the Act requires (see s 90E). Silence on this point can leave the door open to a later claim, so it needs deliberate drafting.

Business assets, companies and trusts

If you own a business, a BFA can set out how your interest is treated if the relationship ends, and how it will be valued. This can protect the business, your staff and your business partners from a forced sale.

The agreement has to work with your other documents, though. Shareholder agreements, company constitutions and trust deeds all have their own rules, and a BFA between two people cannot bind a company or trustee to act against its duties. If a business is involved, your family lawyer and your business and commercial lawyer should coordinate.

Inheritances and gifts from family

Parents often want to protect family wealth for their children. A BFA can record that an inheritance, or an expected one, stays with the person who receives it. It can also protect a gift of a house deposit, for example. Be aware that other legal tools, such as a testamentary trust in a will, may protect inherited wealth more effectively. We return to this in the estate planning section.

What a BFA cannot do

A BFA cannot decide who a child lives with or how time is shared. Parenting arrangements are governed by the court's focus on the child's best interests, and child support is dealt with through the child support scheme. A BFA can deal with the financial side of property, but it cannot override those frameworks.

What Makes a Binding Financial Agreement Valid?

A BFA is valid only if it is in writing, signed by both parties, and each party has received independent legal advice before signing. Each lawyer must also sign a statement confirming that advice was given, and a copy must be provided to the other party. These requirements come from s 90G (and the equivalent de facto provisions).

The s 90G requirements in plain terms

Section 90G sets out what must happen for a BFA to be binding:

1. The agreement is signed by both parties. Both people must sign the final document.
2. Each party gets independent legal advice before signing. The lawyer must advise on the effect of the agreement on that person's rights, and on the advantages and disadvantages of signing it at the time the advice is given.
3. Each lawyer signs a statement of advice. This certificate confirms that the advice was provided.
4. A copy of the statement is given to the other party. It can go to the other party or their lawyer.
5. The agreement has not been terminated or set aside.

Independent means separate. You and your partner cannot share a lawyer. Where possible, we also suggest the lawyers work at different firms, so nobody can later suggest the advice was influenced by the other side.

How valid-looking agreements fail

An agreement can have two signatures and two certificates and still fall apart. The usual problems are:

• Advice that was a formality. The lawyer met the client once, briefly, with the document already finalised and no real chance to negotiate.
• Defective certificates. The statement is missing, unsigned, or was never given to the other party.
• Incomplete disclosure. Assets, trusts, company interests or debts were left out or undervalued.
• Poor drafting. The agreement does not say what the parties meant, or it deals with assets in a way that cannot be carried out.
• Out-of-date terms. The agreement was written for a different life, before children, a business sale or a move interstate.

The certificate is the start of the evidence that advice was real, not the end of it. A court looking at a challenged BFA will ask what actually happened in the lead-up to signing.

Can a Binding Financial Agreement Be Set Aside?

Yes. Under s 90K a court can set aside a BFA for reasons including fraud (such as hiding material assets), a contract that is void, voidable or unenforceable, unconscionable conduct, and a material change in a child's care that would cause hardship. Courts do not set aside agreements lightly, but they do so when the process was unfair.

The main grounds under s 90K

Section 90K lists several grounds. In practice, the ones that matter most are:

• Fraud, including non-disclosure of a material matter. If one party hid a significant asset or misled the other about their finances, the agreement is open to challenge.
• The agreement is void, voidable or unenforceable. This brings in ordinary contract law, including duress and undue influence.
• Unconscionable conduct. One party took unfair advantage of the other's vulnerability in connection with the agreement.
• Impracticability. Circumstances have changed so that the agreement, or part of it, cannot be carried out.
• A material change in circumstances relating to a child. If, since the agreement was signed, the care, welfare or development of a child has changed so that a party with care of the child would suffer hardship, a court can intervene.

A party who simply regrets the deal, or who did not realise how much they were giving up, will usually struggle. Courts expect adults to be held to a contract they signed with advice. The grounds above are about unfairness in how the agreement came about, not about whether it turned out to be a good bargain.

Thorne v Kennedy [2017] HCA 49

The leading case is Thorne v Kennedy [2017] HCA 49, decided by the High Court of Australia. The facts are worth knowing, because they show how the law treats pressure.

Ms Thorne was a young woman from overseas with few ties to Australia. Mr Kennedy was a much older and wealthy property developer. They became engaged, and she relied on him for her place in Australia. About ten days before the wedding, with the arrangements made and guests invited from overseas, he presented her with a prenuptial agreement. She was told the wedding would not go ahead unless she signed, and that the terms were not open to negotiation.

She saw an independent lawyer, who advised her not to sign. She signed anyway. A second agreement was signed after the wedding.

The High Court set the agreements aside, finding undue influence and unconscionable conduct. The lesson is that a lawyer's certificate does not protect an agreement if the signing happened under pressure. Having had advice was not enough, because she did not have a genuine choice.

What this means for you

If you are the person asking for the agreement, give your partner real time and a real opportunity to negotiate. If you are the person being asked to sign, do not accept a take-it-or-leave-it document days before the wedding. Raise the issue early, and ask for more time. An agreement that survives a challenge is one that both people can honestly say they entered freely.

If an agreement is set aside, the parties are generally returned to the ordinary property settlement process in the Federal Circuit and Family Court of Australia. That is the outcome the BFA was meant to avoid, now with legal costs added.

BFA vs Consent Orders: Which Is Right for You?

A BFA is a private contract that does not need court approval, and it can be made before a relationship ends. Consent orders are agreed terms that a court approves after separation, once satisfied they are just and equitable. A BFA offers flexibility and privacy. Consent orders offer court-backed finality.

Feature	Binding financial agreement	Consent orders
Court approval	Not required	Required
When it can be made	Before, during or after the relationship	Only after separation
Independent legal advice	Mandatory for each party	Not mandatory, though strongly recommended
Does a judge check fairness?	No	Yes, the court must be satisfied the orders are just and equitable
Privacy	Private document	Court file, though not publicly searchable in the usual way
Main risk	Can be set aside later if the process was flawed	Lower risk of later challenge once made
Flexibility	Very flexible about terms and timing	Terms must meet the court's fairness test
Best suited to	Planning ahead, or couples wanting privacy and control	Separating couples who want court-backed certainty

When a BFA suits you

A BFA is the only option if you want certainty before the relationship ends. It is also useful for separating couples who want to keep things private and move quickly. And it can be tailored in ways a court might not order, such as detailed provisions about business interests.

When consent orders suit you

Consent orders make sense after separation if you want a court to stamp the agreement. Because a judicial officer has reviewed the terms, they are generally harder to unwind than a BFA. If there is a real risk one party will later challenge the outcome, or there is a significant power imbalance, consent orders can offer extra protection.

The trade-off nobody mentions

The absence of court scrutiny is a BFA's main advantage and its main weakness. Nobody independent checks the agreement when it is signed. The first time anyone examines it closely may be years later, in a dispute. That is why the preparation matters so much.

Tax and duty treatment can differ between the two routes, and between states and territories. Roll-over relief and stamp duty concessions may be available in some cases, so get tax advice alongside legal advice.

De Facto Binding Financial Agreements

De facto couples can make a binding financial agreement under Part VIIIAB of the Family Law Act, in the same way as married couples. It can be made before the relationship begins, during it or after it breaks down. The same core rules apply: a written agreement, independent legal advice for each partner and signed statements.

The de facto provisions mirror the marriage ones. Sections 90UB and 90UC deal with agreements made before or during a de facto relationship and after its breakdown. The requirements for validity and the grounds for setting aside follow the same pattern as ss 90G and 90K.

De facto couples have a particular reason to consider a BFA. Without one, property outcomes can turn on arguments about whether you were in a de facto relationship, when it started and how long it lasted. A clear agreement can reduce those arguments.

One caution: Western Australia deals with de facto property under its own state legislation rather than Part VIIIAB. If you live in Western Australia, make sure your lawyer addresses which law applies to you.

How a BFA Fits With Your Will and Estate Plan

A BFA deals with what happens when a relationship ends or, in some cases, on death, but it does not replace a will. Your BFA and estate plan should be drafted together so that they agree on who receives what, particularly where there are children from earlier relationships, family trusts or a business.

Why the two documents must match

Imagine a parent who signs a prenup to protect assets for their children from a first marriage, but never updates a will that leaves everything to the new spouse. The BFA says one thing, the will says another, and the family is left to argue about which prevails. Preparing both at once avoids that.

Marriage generally revokes an earlier will unless the will was made in contemplation of that marriage, and divorce generally affects gifts to a former spouse. The detail varies between states and territories. Separation alone, without divorce, usually does not change an existing will. If you have separated, review your will promptly. Our related guide on updating or revoking a will in Australia covers the process.

Protecting family wealth

For parents protecting wealth for children, a BFA is one layer. A testamentary trust in your will can add another, by controlling how an inheritance is held and who can access it. Business structures, family trusts and super death benefit arrangements are further layers. Each interacts with the others, which is why we treat the BFA as part of a wider plan. Our guides on testamentary trusts in Australia and on estate planning costs and process explain how those pieces fit.

Claims against an estate

A surviving spouse or de facto partner may still be able to bring a family provision claim against an estate. Whether a BFA limits that claim depends on its wording and on the law of your state or territory. If this concern is part of your reason for making a BFA, raise it at the first meeting so the agreement is drafted with it in mind.

Timing, Cost and Working With a Binding Financial Agreement Lawyer

Start a BFA well before any deadline, and months before a wedding. Costs depend on the complexity of your assets and how much negotiation is needed, and each party pays their own lawyer. A good binding financial agreement lawyer will prepare the agreement carefully, explain it in plain English and give you real time to decide.

Timing

For prenups, the single most useful piece of advice is to start early. Both parties need time to disclose finances, consider the terms, negotiate, get separate advice and think. A rushed timetable is exactly what produced the facts in Thorne v Kennedy. We encourage couples to begin the conversation long before the wedding is close, and to treat the signing date as a point to reach when both people are ready.

For separating couples, the key deadlines come from s 44 of the Family Law Act. A party generally has 12 months after a divorce order takes effect to start court property proceedings. For de facto couples, the limit is 2 years after the relationship ended. After that, you need the court's permission (leave) to proceed. These limits apply to court proceedings, but they shape the whole process, so do not leave a separation agreement unresolved while time runs.

Cost

We do not quote figures here, because costs genuinely vary. The main drivers are:

• The number and type of assets, including companies, trusts and overseas property.
• Whether superannuation needs to be split.
• How much negotiation is needed between the parties.
• Whether valuations or accounting input are required.

Each person pays for their own lawyer. Ask any firm for a clear explanation of how fees will be charged and what the likely stages are. We do not offer no win no fee arrangements. A practitioner can ethically charge an uplift only where there is a genuine, appreciable risk to the client, and that is hard to assess at the start of a matter. Such an arrangement can also put the firm's interests in conflict with the client's when an offer needs to be accepted or rejected. We will not be in that position.

The process, step by step

1. Initial confidential meeting. We listen to your situation, your goals and your concerns, and explain your options.
2. Financial disclosure. Both parties provide full details of assets, debts, income, super and business interests. Gaps here are among the most common reasons a BFA is later attacked.
3. Instructions on terms. We work out what you want the agreement to achieve and how it should deal with change.
4. Drafting and negotiation. The agreement is drafted for your situation. It is then negotiated with the other party's lawyer.
5. Independent advice for each party. Each person receives advice from their own lawyer on the effect of the agreement and the advantages and disadvantages of signing it.
6. Signing and certificates. Both parties sign, each lawyer signs a statement of advice, and the required copies are exchanged.
7. Safekeeping and review. The agreement is stored securely. We recommend reviewing it when life changes, such as the birth of a child, a business sale or the receipt of an inheritance.

If you already have a BFA, it can be reviewed. An existing agreement may have gaps, out-of-date terms or defects in how it was signed. It is far better to find those problems now than during a dispute.

Why Rushed and Template BFAs Fail

BFAs fail at the preparation stage, not the courtroom. Template agreements and rushed signings produce documents that look valid but cannot withstand a challenge. Our position is simple: a BFA is only as strong as the care taken to prepare it, and we do not support template or rushed agreements.

A hypothetical: the prenup signed too late

Consider a couple, Sam and Jordan (a hypothetical, not a real matter). Sam owns a business and wants a prenup. The agreement is a generic template, sent to Jordan by email the week before the wedding. Invitations have gone out and family are travelling. Jordan sees a lawyer for a short appointment, is told the agreement is a template that Sam's lawyer will not change, and signs. The lawyer's certificate is completed.

Years later, they separate. Jordan challenges the agreement. The questions a court would ask are predictable. Was there genuine time to negotiate? Was Jordan under pressure because of the approaching wedding? Did the agreement disclose the true value of the business and the family trust? Was the advice real, or a formality? If the answers are unfavourable, the agreement is at serious risk of being set aside, and both parties face the cost and stress of litigation they signed the agreement to avoid.

The certificates were signed. The paperwork looked complete. The agreement failed anyway, because the process behind it was flawed.

Process is where outcomes are decided

We have seen the same principle in other parts of family law. In one matter, a client was left homeless with her children after the former matrimonial home was burned down by her ex-husband. The insurer told her she was not covered because the policy had been cancelled for non-payment. We worked through the cancellation process and found it was defective. The result was a payout for both the building and the contents. The lesson applies to a BFA: the outcome often depends on whether the process was done properly, not on how the paperwork looks.

Three questions we ask about every agreement

• Could the person signing genuinely have said no? If refusing would have meant losing everything, or cancelling a wedding, the agreement is vulnerable.
• Is the disclosure complete? Every material asset, trust interest and debt should be visible to both sides.
• Does the agreement still fit the life it governs? An agreement that ignores children, business growth or a change in earnings will cause problems.

That is a standard we hold ourselves to. Steven Clark is actively involved in supervising operations and overseeing standards of work. Our approach is to see couples as people first, not files, and to prepare agreements that both partners can stand behind.

Book a confidential consultation

If you are planning a prenup, considering an agreement during your relationship, separating, or want an existing BFA reviewed, we invite you to book a confidential consultation with Steven M Clark's family law team. If a wedding is coming up, allow plenty of time. The earlier we start, the better the agreement will be.

References

• Family Law Act 1975 (Cth), Federal Register of Legislation
• Thorne v Kennedy [2017] HCA 49, High Court of Australia, via AustLII
• Legal Aid NSW, Property settlement agreements
• Federal Circuit and Family Court of Australia