Managing finances in a de facto relationship can be complex, especially when it comes to protecting assets and establishing clear expectations. A legally binding financial agreement provides de facto couples in Australia with a formal way to document how property, superannuation, and financial responsibilities will be handled during the relationship and if separation occurs.
Key Takeaways
- Financial agreements provide legal protection for both partners in a de facto relationship
- Both parties must receive independent legal advice for the agreement to be binding
- Financial agreements can cover property division, superannuation, debts, and spousal maintenance
- These agreements cannot determine child support or parenting arrangements
- Full financial disclosure is essential for the agreement to be valid
What is a Financial Agreement?
Definition and Purpose
A binding financial agreement (BFA) is a formal contract between de facto partners that outlines how assets and financial resources will be managed during the relationship and divided if the relationship ends. Unlike informal arrangements, a BFA has legal standing and can be enforced by courts.
These agreements provide certainty and can help avoid costly legal disputes if the relationship breaks down. They’re particularly valuable for couples with significant assets, business interests, or those entering second relationships.
Legal Basis in Australia
Financial agreements for de facto couples are governed by the Family Law Act 1975, which was amended in 2009 to include de facto relationships. This legislation applies to both opposite-sex and same-sex de facto couples across Australia.
The Act provides a framework for creating enforceable agreements that stand up to legal scrutiny, provided they meet specific requirements.
Types of Agreements
De facto couples can create financial agreements at different stages:
- During the relationship (similar to a ‘pre-nup’ but for de facto relationships)
- When separating
- After separation has occurred
Each type serves the same fundamental purpose but may address different concerns depending on the relationship stage.
Who Counts as a De Facto Couple?
Key Factors Used by Courts
Australian law considers several factors when determining if a de facto relationship exists:
- Living together on a genuine domestic basis
- The length of the relationship
- The nature of your common residence
- Financial interdependence or dependence
- Care and support of children
- Public aspects of the relationship
- Mutual commitment to a shared life
No single factor is determinative – courts look at the relationship as a whole.
Time and Eligibility Considerations
Generally, a relationship must have lasted at least two years to be recognised as de facto under family law, unless there’s a child of the relationship or significant contributions by one party. However, couples can still create binding financial agreements regardless of relationship length.
“Financial agreements give de facto couples the same opportunity as married couples to protect their assets and clarify financial expectations, providing peace of mind throughout the relationship.” – Advance Family Law
What Financial Agreements Can and Cannot Cover
Typical Inclusions
Financial agreements commonly address:
- Division of property (homes, investments, vehicles, etc.)
- Superannuation treatment and splitting arrangements
- Allocation of debts and liabilities
- Spousal maintenance provisions or waivers
- Treatment of future acquisitions
- Business interests, trusts, and potential inheritances
- Personal items and household contents
Clear Exclusions
Financial agreements cannot resolve:
Child-related matters – including parenting arrangements, custody, or child support obligations. These remain within the jurisdiction of the Family Court and the Child Support Agency, regardless of what a financial agreement might state.
Formal Requirements and Proof
Writing, Signatures and Witnessing
For a financial agreement to be binding, it must be:
In writing, clearly stating it’s made under the relevant section of the Family Law Act. Both parties must sign the document, and signatures must be properly witnessed according to legal requirements.
Independent Legal Advice
Each party must receive independent legal advice about:
The effect of the agreement on their rights and the advantages and disadvantages of entering into it. The lawyers must provide signed certificates confirming that this advice was given.
Full Financial Disclosure
Both parties must provide complete and honest disclosure of all relevant financial information. Hiding assets or providing misleading information can invalidate the agreement and may constitute fraud.
How to Prepare a Binding Financial Agreement
Gather Financial Documents
Start by collecting documentation of all your assets, liabilities, and financial resources:
Bank statements, property valuations, superannuation statements, investment portfolios, business records, tax returns, and loan documents will all be necessary.
Seek Specialist Family Law Advice
Consult a family lawyer experienced in de facto financial agreements. They can explain your legal rights, suggest appropriate provisions, and ensure the agreement meets legal requirements.
Drafting and Negotiation
Work with your lawyer to draft agreement terms that fairly address both parties’ interests. The draft will typically be exchanged between lawyers for negotiation until both parties are satisfied.
Execution and Record Keeping
Once finalised, both parties sign the agreement in the presence of witnesses. Keep the original in a safe place and provide copies to both lawyers and financial advisors as needed.
Common Pitfalls to Avoid
Many financial agreements fail because of:
Inadequate disclosure, vague or contradictory wording, failure to obtain proper legal advice, not addressing superannuation correctly, or not updating the agreement after significant life changes (like having children or receiving an inheritance).
When Courts Can Set Aside Agreements
Common Grounds for Invalidation
Courts may set aside financial agreements if there’s evidence of:
Fraud or non-disclosure of assets, duress or undue influence during signing, unconscionable conduct, impracticality in performing the agreement, or significant changes in circumstances relating to care of children.
Alternatives to Consider
If a binding financial agreement doesn’t seem suitable, alternatives include:
Consent orders through the Family Court, mediated agreements, or superannuation splitting arrangements. Each option has different requirements and levels of formality.
Looking Forward
Financial agreements should be reviewed periodically, especially after major life events such as:
Birth of children, significant asset acquisition, inheritance, or business changes. What seemed fair at the beginning of a relationship might need adjustment as circumstances evolve.
Conclusion
A financial agreement provides clarity and security for de facto couples, potentially saving significant stress and expense if the relationship ends. The key is ensuring the agreement is properly drafted, executed, and regularly reviewed to maintain its relevance and validity. For personalised advice tailored to your specific situation, contact Advance Family Law to discuss how a binding financial agreement might benefit your relationship.
