What is a Binding Financial Agreement (BFA)? 

What is a BFA? 

In Australia, a BFA is a legal document that allows parties (whether they are married or in a de facto relationship) to formalise their financial arrangements. It is important to remember that this document is different to Consent Orders, which get filed in the Federal Circuit and Family Court of Australia (Division 2), and then subsequently made as Court Orders. 

Unlike informal agreements, a BFA is a legally binding contract that can govern financial matters before, during, or after a relationship. The whole purpose of a BFA is to provide clarity and certainty about the division of assets and liabilities in the event of separation or divorce – no matter which stage your relationship is at. 

Benefits of a BFA 

Having a BFA can give you several advantages: 

• Certainty and protection: A BFA provides certainty about how financial matters will be dealt with if the relationship ends. This can be especially important if your case deals with significant assets, business interests, or if you are entering into a new relationship where you have children from previous relationships. 

 

• Prevention of Court proceedings: By having a clear financial arrangement in place, a BFA can help avoid lengthy and expensive court battles in the event you separate. 

 

• Protection for both parties: A BFA protects both parties by ensuring that financial matters are settled according to mutually agreed terms, rather than leaving the division of assets up in the air and, in the worst case scenario, being determined by the Court. 

 

• Flexibility: A BFA can be tailored to suit the specific needs and circumstances of the couple wishing to enter it. It can cover a wide range of financial issues, from property division to spousal maintenance. Plus, if circumstances change and you wish to update your BFA, if your partner agrees, you can terminate the earlier agreement and enter into the new BFA. 

 

Legal Requirements of a BFA 

If you are going down the BFA road, ask your solicitor to explain what you need to do to make sure that your BFA is robust and most importantly, valid and legally binding. In short, there are several legal requirements: 

• Written Agreement: At times, we get cases where parties have come to see us thinking they have a BFA in place, but it is simply a document created by themselves informally. It is important to remember that such documents are not legally binding on parties, and at best, simply show what the parties’ intentions were at any given time. A BFA must be in writing – let your solicitor draft it for you. 

 

• Independent Legal Advice: Both parties need to have lawyers and receive independent legal advice before signing the agreement. This ensures that each party fully understands the implications of the BFA upon their rights and obligations under the legislation. If your partner does not wish to get their own lawyer, then a BFA is not available to you as an option. 

 

• Signatures: Both parties must sign the agreement following receipt of their independent legal advice. 

 

• Not Terminated / Set Aside: For a BFA to be binding to the parties, the agreement must not be terminated or have been set aside by a Court. 

Can a BFA be challenged? 

While a BFA is designed to be binding, in some cases, it is possible for a Court to set it aside under certain circumstances including but not limited to: 

• Fraud / Non-Disclosure: If one party deliberately left the other party in the dark as to their true financial position and/or did not provide full disclosure. 

 

• Trying to defraud creditors: E.g. if parties are concerned about a looming bankruptcy and decide to transfer the family home into the name of one spouse only. 

 

• Duress / Undue Influence: If one party can show that they were forced or coerced into signing the BFA, the Court may set it aside. 

 

• Material Change in Circumstances: In some cases, a Court may set aside a BFA if there has been a significant change in the circumstances of one party, such as the birth of a child or a significant change in financial circumstances that was not initially contemplated. 

 

• Unconscionable / Unfair: A Court may decide that the BFA is manifestly unfair to one party and therefore unenforceable. This could occur if, for example, one party is left with inadequate financial support and he or she is the primary caregiver of the parties’ children, or if the terms of the agreement are deemed to be unreasonable. 

Common Misconceptions about BFAs 

We tend to see quite a few misconceptions about BFAs in family law, such as: 

• BFAs are only for the ultra-wealthy: False! Whilst BFAs are often used by people with significant assets, they are not limited to high net worth clients. Couples who want clarity about their financial arrangements – regardless of their wealth – can also benefit from a BFA. 

 

• A BFA can replace a Court Order: A BFA can resolve financial matters, but it does not replace or override a Court Order.  

 

• Only married couples can get a BFA: Not true – while commonly associated with marriages, BFAs can also be used by people in de facto relationships. The legislation provides for both married and de facto couples – either before their relationship starts, during their relationship, or after their relationship has ended. 

In Summary 

A BFA offers couples a way to protect their financial interests and reduce potential conflict in the event of separation. By ensuring both parties have independent legal advice and agree to clear financial terms, BFAs can provide peace of mind and clarity for those seeking to safeguard their assets. However, it is important to understand the legal requirements and potential for the BFA to be challenged in the future. Consulting with an experienced family lawyer is essential to ensure the BFA is drafted correctly and meets your specific needs.