In Australia, the Family Law Act of 1975 provides for the creation of financial agreements which may be made before, during, or after a marriage (or de facto relationship). A financial agreement, by definition, outlines how, in the event of the breakdown of the marriage or de facto relationship, all or any of the property or financial resources of either or both of the parties is to be dealt with.
Financial agreements are sometimes called “marriage separation agreements” or just “separation agreements” and can also be used for de facto separation. And if they are used before or during a relationship they are often referred to as prenups, postnups or cohabitation agreements.
You can learn more about Using a Separation Agreement Template in Australia
What is a Binding Financial Agreement in Divorce Law?
The Family Court of Australia only recognises a financial agreement once it has become binding. If an agreement is not binding, a party may dispute it, leading to costly court cases and an outcome that neither party is happy with.
To ensure your financial agreement is legally binding, you must pass specific criteria set out by Section 90G of the Family Law Act. It must contain:
- A statement in the body of the agreement by the parties to the effect that they have received legal advice independent of each other and
- A certificate from the legal adviser that the advice has been provided.
This prevents either party from arguing that, when signing the agreement, they did not understand what they were signing or its consequences.
Can a Binding Financial Agreement Be Overturned?
If a Financial Agreement complies with the requirements set out in the Family Law Act, it will be binding on and enforceable against the parties. It is important to remember that a Financial Agreement is a contract. All contracts can be set aside in certain circumstances, for example, where agreement has been obtained by fraudulent means.
Section 90K of the Family Law Act sets out the circumstances in which a Court may set aside a Financial Agreement. They are:
- Fraud, such as not revealing or misstating the value of assets.
- Entering the agreement to cheat creditors.
- The agreement being invalid, unenforceable, or not prepared correctly.
- Circumstances changing since the agreement was made, making it hard or impossible to follow.
- Significant changes, especially related to child care, that cause hardship and were not anticipated in the agreement.
- Unfair or unconscionable conduct during the making of the agreement.
- A ‘payment flag’ on a superannuation interest is in place with no chance of being lifted.
- The agreement involves a superannuation interest that cannot be split.
Can I Use a Binding Separation Financial Agreement Template in Australia?
Whether the agreement is drafted from a high quality template or drafted from a template completed by a Lawyer (which is what they do anyway) ultimately it is the lawyer who provides your legal advice who bears the responsibility for ensuring your agreement is sound.
The good news is that the courts recognise financial agreements created from a template as long as they fulfil the other criteria.
If your separation is amicable, using a simple separation agreement template can save you thousands of dollars in legal fees compared to drafting the document from scratch. You can view our guide Should You Get a Financial Separation Agreement in Australia? to help you decide if it’s for you.
There are two important considerations when choosing to use a separation agreement template.
- Check the origin of your template: Many online agreement templates are created overseas and do not comply fully with Australian Law. If you use a template that hasn’t been created by Australian lawyers, there is a strong chance that the eventual document will fail to comply with our laws and you have wasted your time and money!
- You still need Legal Advice BEFORE you sign the agreement: The second thing to remember is that even the best-drafted agreement, made using a thorough and detailed template, is only considered binding once both parties have sought independent legal advice. Both parties must have their lawyers review the draft and receive information about how it affects their rights. If an agreement does not include certificates stating that legal advice has been given to both parties, it will not be considered binding. When searching for a separation agreement template, look for companies offering independent review services for this vital step.
Using a Financial Agreement Before or During a relationship
As stated previously, a BFA can be made before or during a marriage or relationship – for example, prenups, postnups or cohabitation agreements.
More and more Australians are creating and maintaining financial agreements as part of healthy relationships. While there is comfort in knowing what would happen if the marriage/relationship ended, there is also greater emotional confidence in knowing that you are both on the same page regarding finances.
Over half of the men in Australia believe that money is a source of stress in their relationships, with a lack of communication being one of the driving factors behind this. Being open and honest about your finances, your priorities in expenditure, and long-term goals, leads to stronger relationships. While it may sound like an agreement is an expectation of failure, it is a tool for open communication and a chance to express your desires for the future safely.
Does a Separation Agreement Always Lead to Divorce?
It’s not the agreement that determines whether you are on your way to a divorce but rather your intention as a couple. It’s also important to remember that divorce and property settlement are two different things – property settlement finalises financial matters between you, whereas divorce dissolves the marriage.