Binding Financial Agreements (BFA)

In the realm of family law, one of the most critical aspects that couples often grapple with is the division of property and financial resources. This is where Binding Financial Agreements (BFAs) come into play. A BFA is a legally binding agreement that stipulates how a couple’s assets and financial resources will be divided in the event of a relationship breakdown.

BFAs are governed by the Family Law Act 1975 (Cth) and can be entered into before, during, or after a marriage or de facto relationship. They are designed to provide certainty and minimise potential disputes over property division if the relationship ends.

What is a Binding Financial Agreement?

A Binding Financial Agreement is a private agreement between two parties in a relationship that sets out how their assets, financial resources, and liabilities will be divided if their relationship ends. It can cover a wide range of assets, including real estate, shares, superannuation, and other property.

BFAs can also include provisions for spousal maintenance. However, it’s important to note that BFAs do not cover matters relating to children, such as child support or custody arrangements.

Why Consider a Binding Financial Agreement?

BFAs offer several benefits. Firstly, they provide certainty and clarity about financial matters, reducing the potential for disputes and costly court proceedings. Secondly, they allow couples to take control of their financial affairs and make decisions that reflect their unique circumstances and needs.

BFAs can also provide protection for assets brought into the relationship, safeguard inheritances, and protect business interests. They can be particularly beneficial in situations where there is a significant disparity in wealth or earning capacity between the parties.

Legal Requirements for a Binding Financial Agreement

For a BFA to be legally binding, it must meet certain requirements under the Family Law Act 1975 (Cth). These include:

1. It must be a written agreement as to how the parties’ property and financial resources are to be dealt with upon breakdown of the marriage, and/or as to spousal maintenance;
2. It must be made when no other financial agreement are in force
3. It must be expressed to be made under either s 90B, 90C or 90D (depending on when the parties enter in to the agreement and whether they are married)
4. If the parties are separating it must contain a separation declaration signed by at least one of the parties stating that they have separated and are living separately and apart when the declaration was signed (or last signed, if both signed); and, in the opinion of the parties making the declaration, there is no reasonable likelihood of cohabitation being resumed
5. If the BFA contains a spousal maintenance clause, it must specify each recipient and the amount of (or value of the property attributable to) their maintenance
6. If the BFA contains a release of future maintenance clause it must recite the recipient as able to support themselves without an income tested pension, allowance or benefit
7. It must be signed by both parties: s 90G(1)(a); and
8. If made before 14 January 2004, the BFA must be signed after each party was provided with independent legal advice from a legal practitioner about:-
   • the effect of the agreement on the rights of that party; and
   • whether or not, at the time when the advice was provided, it was to the advantage, financially or otherwise, of that party to make the agreement; and
   • whether or not, at that time, it was prudent for that party to make the agreement; and
   • whether or not, at that time and in the light of such circumstances as were, at that time, reasonably foreseeable, the provisions of the agreement were fair and reasonable”:

9. if made on or after 14 January 2004, the BFA must be signed after each party has been provided with independent legal advice from a legal practitioner about either:
   • the effect of the agreement on the rights of that party and about the advantages and disadvantages, at the time the advice was provided, to that party of making the agreement; OR
   • all of the items (i) to (iv) above

Challenging a Binding Financial Agreement

While BFAs are intended to be final and binding, they can be set aside by a court in certain circumstances. Section 90K(1) of the Family Law Act empowers a court to make an order setting aside a financial agreement if, and only if, the court is satisfied that:

• the agreement was obtained by fraud (including non-disclosure of a material matter); or
• either party to the agreement entered into the agreement:
  • for the purpose, or for purposes that included the purpose, of defrauding or defeating a creditor or creditors of the party;
  • with reckless disregard of the interests of a creditor or creditors of the party; or
• the agreement is void, voidable or unenforceable;
• in the circumstances that have arisen since the agreement was made it is impracticable for the agreement or a part of the agreement to be carried out;
• since the making of the agreement, a material change in circumstances has occurred (being circumstances relating to the care, welfare and development of a child of the marriage) and, as a result of the change, the child or, if the applicant has caring responsibility for the child, a party to the agreement will suffer hardship if the court does not set the agreement aside;
• in respect of the making of a financial agreement — a party to the agreement engaged in conduct that was, in all the circumstances, unconscionable;
• a payment flag is operating under Part VIIIB on a superannuation interest covered by the agreement and there is no reasonable likelihood that the operation of the flag will be terminated by a flag lifting agreement under that Part; or
• the agreement covers at least one superannuation interest that is an unsplittable interest for the purposes of Part VIIIB.
• You should always get advice from the best family lawyers. Barker Evans provides expert family law advice, and we are located in the heart of Sydney CBD. We have considerable experience with drafting BFAs and guiding clients though the BFA process.

If you want advice from an expert family lawyer, please do not hesitate to contact us for a free 15 minute call on (02) 8379 1892 or info@barkerevans.com.au.