Binding Financial Agreements explained.

A Binding Financial Agreement (BFA) is the closest thing Australian law has to a prenup. Properly drafted, it lets two people decide in advance how property will be divided if the relationship ends. Improperly drafted, it’s a court application waiting to happen.

BFAs are governed by Part VIIIA of the Family Law Act 1975 (Cth). They can be entered into before marriage (s90B), during marriage (s90C), or after separation (s90D). Equivalent provisions apply to de facto relationships under Part VIIIAB.

When a BFA makes sense

• Significant pre-relationship assets. One partner enters the relationship with substantial wealth (inheritance, family business, prior matrimonial settlement) and wants certainty over its treatment.
• Second relationships with children from prior unions. Common motivation: protecting an existing inheritance line for children of the first relationship.
• Business interests. Where one partner is a shareholder in a family business and other shareholders want certainty that the business won’t be drawn into a future property settlement.
• After separation, before court applications. A separation BFA (s90D) is a private alternative to consent orders — faster but with stricter execution requirements.

The execution requirements

For a BFA to be binding, all of these must be true:

1. It is in writing and signed by both parties.
2. Both parties received independent legal advice about the agreement’s effect on their rights, and the advantages and disadvantages of entering into it.
3. Each party received a signed statement from their lawyer confirming that advice was given (the “certificate”).
4. Original certificates are exchanged or copies retained by both lawyers.

When BFAs get set aside

Under s90K, a court can set aside a BFA if:

• It was obtained by fraud or non-disclosure of a material matter
• A party entered into it under duress, unconscionable conduct, or undue influence
• It is void, voidable, or unenforceable
• Circumstances have changed (e.g. arrival of children) making enforcement impractical
• A child of the relationship would suffer hardship if the BFA is enforced

The High Court’s decision in Thorne v Kennedy [2017] HCA 49 set the modern benchmark for setting aside a BFA. Mrs Thorne’s pre-nuptial agreement was set aside because Mr Kennedy presented the agreement days before the wedding with significant disparity in bargaining power and time pressure. Set-aside applications since Thorne have been more frequent.

Typical costs

• Simple BFA, pre-marriage: $3,500–$6,500 per party (so $7,000–$13,000 combined).
• BFA with business or trust structures: $6,000–$15,000 per party.
• Post-separation BFA: Similar costs but with property valuation disbursements typically adding $2,000–$8,000.
• Set-aside application: $25,000–$120,000+ depending on complexity.

Alternatives worth considering

A BFA is not the only way to achieve certainty:

• Consent orders. For post-separation arrangements, consent orders are usually cheaper, less prone to set-aside, and sealed by the court. Most family lawyers prefer consent orders to a post-separation BFA where possible.
• Trust structures. For business and family-wealth protection, trust arrangements (where assets are not owned by the partner) often achieve similar outcomes more robustly.
• Insurance / quarantining. For specific assets (e.g. an inheritance), careful separation of the asset from joint use can achieve practical protection.

What to ask the lawyer

1. Have you had a BFA you drafted set aside? Why?
2. How will you ensure independent advice is properly documented for the other party?
3. What disclosure should I make to my partner before signing? Is non-disclosure a risk for set-aside?
4. Is a BFA the right tool here, or is a consent order or trust structure better?
5. What happens if we have children after signing — does the BFA need updating?