Binding Financial Agreements (BFA)
Financial Agreements can be made prior to marriage and are commonly known as ‘pre nups’ (pre-nuptial) (s90B), during a marriage (s90C) and following a divorce (s90D). Similarly, a Financial Agreement can be made prior to entering into a de facto relationship (contemplating a de facto relationship) (S90UB), during a de facto relationship (s90UC) and following the breakdown of the de facto relationship (s90UD)
Financial Agreements can also deal with spousal maintenance matters and in these types of Financial Agreements, the parties are agreeing as to how their assets, liabilities, superannuation entitlements, financial resources and spousal maintenance matters are to be dealt with in the event of their separation.
Frequently Asked Questions
- The agreement is signed by all parties.
Before signing the agreement, each spouse was provided with independent legal advice about the effect of the agreement on the rights of that party and about advantages and disadvantages, at the time the advice was provided to that party of making the agreement.
- The party is given the other persons signed statement by their legal practitioner -whether before or after signing the agreement.
- The agreement has not been terminated or set aside by the court.
- A court would be satisfied that it would be unjust and inequitable if the agreement were not binding on the spouse parties disregarding any changes in circumstances from the time the agreement was made and the court makes an order declaring the agreement is binding on the parties and it has not been terminated or set aside by a court.
Section 90K and 90UM sets out how a Financial Agreement may be set aside by a court. A Financial Agreement is entered into when the agreement is ‘not just and equitable’, which is the test in property settlement proceedings that a Court must be satisfied with prior to making final orders. Given this and the nature of Binding Financial Agreements, it is required that each party obtain independent legal advice prior to entering into the agreement. This ensures that whilst agreements may not be ‘just and equitable’, each party has been advised of their own rights and entitlements and have properly entered into the agreement after receipt of such independent legal advice.
A major benefit of a Financial Agreement is that it can exclude the other party from seeking spousal maintenance. This can only occur if neither party is dependent on an income-tested benefit or pension. Agreements to exclude spousal maintenance are usually made on a mutual basis. A court order cannot ever provide this outcome. Further, should an order for spousal maintenance be made by the court, either party can seek to vary that order at any point in the future.
Under the Family Law Act, a party has the ability to seek spousal maintenance from the other party up until 12-months following the date a Divorce Order takes effect or within 2-years of the separation of a de facto relationship. Dependent on parties’ circumstances, an agreement of this nature can have significant value and future peace of mind.
Whilst each judicial officer has discretion when determining a final outcome in a matter, there is usually a range of likely outcomes. This will also depend on how evidence ultimately falls on a final basis as to what findings may be made and the ultimate outcome. The review of orders by a Registrar ensures that the agreement reached by the parties and proposed by consent is within the range of likely outcomes.
Following the breakdown of a relationship, parties have one opportunity to make property settlement adjustment orders under section 79 or 90SM of the Family Law Act. Both of these sections have an aim to end the financial relationship of both parties (section 81 and section 90ST). Generally speaking, negotiations as to how an agreement is ultimately reached by the parties is made in the context of what a court would do on a final basis pursuant to the Family Law Act and considering the range of likely outcomes.
When Can Consent Orders Be Set Aside?
There has been a miscarriage of justice because of fraud, duress, suppression of evidence (including failure to disclose relevant information), giving of false evidence or any other circumstance; or
In the circumstance that has arisen since the order was made, it is impracticable for all or part of the order to be carried out;
A person has defaulted in carrying out an obligation imposed on them by the order and in the circumstances that have arisen as a result, it is just and equitable to vary the order or to set the order aside and make another order; or
Exceptional circumstances relating to the care of children have arisen since the making of the order, meaning a party will suffer hardship if the court does not vary or set aside the order; or
A proceeds of crime order has been made covering property of a party, or a proceeds of crime order has been made against a party.
Under the Family Law Act following the separation of the party’s obligation of full and frank financial disclosure commences with respect to pre action procedures for property matters and any proceedings commenced under the Act. Each party is required to provide certain information as to their financial circumstances. In preparing an Application for Consent Orders for the court to consider, each party must execute a Statement of Truth which includes confirmation that the party has fully disclosed their financial circumstances.
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