Binding Financial Agreements in Australia: What They Are and the Risks if Not Done Properly

Binding Financial Agreements (BFAs) are a useful legal tool that allow couples to set out how their assets, liabilities, and financial resources will be divided if their relationship ends. While they are often referred to as ‘prenups’, they can also be made during or after a marriage or de facto relationship.

When prepared correctly, a BFA can provide certainty, privacy, and peace of mind. However, if not done properly, these agreements can easily be challenged or set aside — leaving one or both parties exposed to significant financial risk.

What Is a Binding Financial Agreement?

A Binding Financial Agreement is a private contract made under the Family Law Act 1975 (Cth). It allows couples — whether married or in a de facto relationship — to decide how property, superannuation, and spousal maintenance will be dealt with if they separate.

BFAs can be entered into:

A well-drafted BFA can prevent costly and stressful court proceedings by clearly outlining what each party is entitled to and protecting assets brought into the relationship.

Why People Enter into BFAs

There are several reasons people choose to have a Binding Financial Agreement in place, including:

BFAs are especially valuable where one partner has significantly more assets than the other, or where family contributions or business interests need protection.

Legal Requirements for a Valid BFA

To be legally binding under the Family Law Act, both parties must:

1. Receive independent legal advice before signing, explaining the effect of the agreement and its advantages/disadvantages
2. Have their lawyers sign a statement confirming that advice was given
3. Sign the agreement voluntarily — without coercion, duress, or undue influence
4. Ensure the document is drafted in strict compliance with the relevant sections of the Family Law Act 1975 (Cth)

Failing to meet any of these criteria can render the BFA invalid.

The Risks of Poorly Drafted or Executed BFAs

Many people underestimate how easily a Binding Financial Agreement can be overturned if it is not prepared properly. The Family Court and Federal Circuit Court have repeatedly set aside BFAs for reasons including:

If a BFA is declared invalid, the court can re-open the property settlement process — often resulting in expensive litigation and outcomes the parties were trying to avoid in the first place.

How to Protect Yourself

If you are considering entering into a Binding Financial Agreement, it’s essential to:

Key Takeaway

A Binding Financial Agreement can be an effective way to secure your financial future — but only when drafted, reviewed, and executed correctly. A poorly prepared BFA can do more harm than good, leaving you vulnerable to disputes or court proceedings.

At EAS Legal, our experienced family law team can help you draft or review a Binding Financial Agreement that protects your interests and complies fully with the Family Law Act.

Contact our office today on 1800 117 533 Visit www.easlegal.com.au for trusted advice about your financial agreement or other family law needs.