Binding Financial Agreements (Prenups) in Australia Explained

Binding financial agreements, often called prenups or prenuptial agreements, allow couples to decide in advance, or after separation, how their finances will be divided. They are increasingly common in Australia, including for second marriages, couples with family businesses or inheritances, and de facto couples. This guide explains what binding financial agreements are, what makes them binding, and the risks involved.

What is a binding financial agreement?

A binding financial agreement (BFA) is a written agreement between two people about how their property and financial resources will be dealt with if the relationship ends. It is also known as a financial agreement under the Family Law Act 1975 (Cth). If it meets the legal requirements, it can replace the court's role in dividing property, which gives the parties greater control and privacy.

BFAs can be made:

• Before marriage or a de facto relationship (commonly called a prenup)
• During the relationship (sometimes called a midnup)
• After separation or divorce (a postnup or separation agreement)

The Act covers married couples and de facto couples, including same-sex couples. Different parts of the legislation apply to each, but the principles are similar.

What can a BFA cover?

A BFA can deal with how existing and future property is to be divided, including real estate, investments, businesses, and, in many cases, superannuation. It can also address spousal maintenance. It cannot take away the court's powers regarding children. Arrangements about parenting and child support remain subject to the law and cannot be contracted out of by agreement.

What makes a BFA binding?

The legislation is strict. To be binding, a financial agreement generally must:

1. be in writing and signed by both parties
2. state that it is made under the relevant provisions of the Family Law Act
3. be made after each party has received independent legal advice from a lawyer about the effect of the agreement on their rights and about its advantages and disadvantages at the time the advice was given
4. include a signed statement from each lawyer confirming that advice was given, with a copy provided to each party

The court has some flexibility where there is a technical defect, but you should not plan around that. Getting the process right from the start is safer and cheaper than arguing about it later.

Can a BFA be set aside?

Yes. Even a signed agreement can be challenged. The court can set aside a financial agreement in limited circumstances, which include:

• fraud, including non-disclosure of a material matter
• undue influence, duress or unconscionable conduct
• the agreement being void, voidable or unenforceable
• a material change in circumstances relating to the care, welfare and development of a child, which would cause hardship if the agreement were enforced

Parties can also end a BFA by agreement, using a separate termination agreement that satisfies the legal requirements.

Practical points before you sign

• Timing: avoid signing under time pressure. An agreement presented days before a wedding is more vulnerable to challenge on grounds such as duress.
• Full financial disclosure: each party should provide accurate information about assets, debts and income. Disclosure is not strictly required by the legislation, but its absence can raise risks.
• Independent advice: each person needs their own lawyer. One lawyer cannot properly advise both parties.
• Think about the future: consider children, career breaks, inheritances, business growth and what a fair outcome might look like in 10 or 20 years.
• Review regularly: circumstances change, and an agreement written years ago may no longer reflect your wishes.
• Consider the alternatives: after separation, consent orders from the court are another way to finalise a property settlement, and they may suit some parties better.

Is a BFA right for you?

A BFA can provide certainty and protect assets that you bring into a relationship, such as a family business or an inheritance. It may also reduce conflict if the relationship ends. On the other hand, it is a complex legal document, and a poorly drafted agreement can leave a party worse off than if they had no agreement at all. A discussion about financial arrangements can also be an emotional one, and approaching it respectfully matters.

Frequently Asked Questions

Are prenups legally binding in Australia?

They can be, if the agreement meets the legal requirements, including independent legal advice for both parties. If it does not, it may not be binding.

Can a BFA be made after a relationship has started or ended?

Yes. Financial agreements can be made before, during or after a relationship, for both married and de facto couples.

Can a BFA decide parenting arrangements?

No. The court retains its role in relation to children, and child support obligations cannot be avoided by agreement.

Does my partner need to know about all my assets?

Disclosure is not an automatic statutory requirement, but failing to disclose material information may expose the agreement to being set aside for fraud. It is generally prudent to disclose fully.

This article is general information only and is not legal advice. Laws and processes change, and every situation is different. Speak to a lawyer about your circumstances before you act.