What is a Financial Agreement?
In Australia, a Financial Agreement is a written agreement between two persons in a relationship which sets out how they propose to deal with financial matters both during the relationship and in the event of a separation. An agreement will typically provide how the parties propose to operate in respect of financial matters, as well as how specific assets are to be divided. This agreement is known as a "Financial Agreement" or "FA".
In some countries financial agreements are called "pre-nuptial agreements" (agreements made between parties prior to their marriage) or "post-nuptial agreements" (agreements made after their marriage) or "de facto agreements" (made between parties who live together, including same sex relationships).
What is a Binding Financial Agreement?
When the parties to a financial agreement each receive formal legal advice and each of the advising solicitors issue a Certificate in accordance with the Family Law Act 1975 (or in the case of de facto agreements in Western Australia, in accordance with the Family Court Act 1997 (WA)) then the financial agreement becomes "binding" on the parties to the agreement. The agreement is then known as a "Binding Financial Agreement" or "BFA".
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Traditionally, these agreements were common place and indeed, essential, as the law in the 19th century was that the male partner had control over his wife’s assets in the absence of such agreement. In more recent times, financial agreements have become extremely popular, particularly since the Family Law Amendment Act 2000 (which took effect from 27 December 2000) provided for BFAs to be fully enforceable in the Family Court of Australia provided certain conditions are met by the parties to the Agreement.
If you are living with someone or intending to live with someone and you wish to protect yourself against a possible claim against your assets in the event of separation at some time in the future, then you may wish to consider a BFA.
The breakdown of a relationship is a very stressful time. Sorting out your financial arrangements is likely to be among your top priorities. If you have reached an agreement on how your assets and liabilities are to be divided, then you can formally document your agreement through a BFA (also called a "separation agreement"). This is essential if you need to split superannuation, transfer real estate and refinance mortgages. BFAs are fully enforceable in the Family Court of Australia and meet all the requirements of the Australian Tax Office and Office of State Revenue in respect of avoidingstamp duty when transferring real estate.