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FAQ about financial agreements and property settlement

People usually have a number of questions about putting a financial agreement in place. We've put a list together here - feel free to give us a call on 1800 608 088 if you can't find the information you need.

About Financial Agreements in General

Is there a difference between a Binding Financial Agreement and a Financial Agreement?

No, both terms relate to the same written instrument or contract. Binding Financial agreements were first introduced into the Family Law Act in 2000. In 2008 the law makers decided to drop the use of the term Binding Financial Agreement and subsequently replaced it with simply Financial Agreement. Some legal practitioners still refer to the agreements as BFA’s but ultimately either term is acceptable.

Can anybody enter a financial agreement?

Just about anyone can enter into a binding financial agreement as long as they normally reside in Australia.

It makes no difference if you are married or in a de facto relationship (whether heterosexual or same sex): all are treated equally under the law, and the same rights will apply. You can make a financial agreement if you are:

Marriage partners – Engaged to be married, Married, Separated (but still married), Separated or Divorced

De facto partners – Considering moving in together, Living together or Separated

There are very few restrictions on who can enter into a financial agreement as long as they are able to meet the six principles of contract law.

Will our financial agreement actually be binding?

Financial Agreements are legally binding if they comply with the requirements specified in the Family Law Act 1975 (cth):

  • the Agreement must be signed;
  • each party must receive legal advice from a solicitor before signing their Agreement;
  • each party must be given a signed statement by the solicitor stating that they received their legal advice; and
  • each party must give the other party a copy of their solicitor’s statement confirming they have received their legal advice.

Even in circumstances where the parties have not fully complied with the above formal requirements, the Court can still make an order declaring a financial agreement to be binding, if it is satisfied that it would be unjust and inequitable if it were not (section 90G of the Family Law Act).

What are the disadvantages of entering into a financial agreement?

The disadvantage of making a Binding Financial Agreement is that you give up the right to have a Court decide for you, about the matters you have dealt with in your Agreement. This means that the court cannot take into account matters which it otherwise would because you have decided to control your own affairs.

For example, lets say you have stated in your agreement that “each party will retain all their right title and interest to their superannuation entitlements and have no further claim on the entitlements of the other.” You can’t then change your mind and ask the court to make a decision about giving you a piece of the other persons Superannuation, without first attempting to have the agreement set aside.

What are the advantages of entering into a financial agreement?

The advantages of having a Financial Agreement include:

  • they save you time and money compared with court proceedings;
  • you have greater control over the final outcome. You get to decide what you will be do with your property rather than leaving it to a judge (to make a decision) or a court officer (to approve consent orders);
  • you avoid the stress of court proceedings that you and your family may otherwise be exposed to;
  • there is no stamp duty payable on property transactions made pursuant to a financial agreement;
  • certainty of outcome.

They are of particular benefit to people who wish to avoid messy litigation concerning their property division.  Separation itself is hard enough.  BFA’s encourage people to agree about how their property should be distributed in the event of, or following, separation.

Are financial agreements risky?

We get calls each week from customers wanting to make prenuptial and other financial agreements. Often they have shopped around, and can’t understand why they are being quoted costs sometimes as high as $10,000 or $20,000. Your quote may have been significantly less than this, but there is a reason for the disparity.

There is a level of concern among the legal profession that financial agreements are risky instruments. This concern is particularly directed at those Agreements that do not come into effect immediately, but rather, at a later point in time when there is a breakdown of the relationship (ie. pre-nuptial agreements or agreements made during the course of the relationship).

If we use the example of a couple who are planning on getting married, a prenuptial agreement entered into today, may never be needed, or it may not be called upon until many years later. That is because the agreement will not come into effect until after the relationship has broken down and this could be 10, 20 or even 30 years down the track. At that point, circumstances may be completely different than originally contemplated or anticipated by the parties, and if either party is unhappy with the terms they have previously agreed to, they may decide to make an application to the court to have it set aside.

Even though the parties have agreed to the terms of the agreement as a substitute for court action, they still have the option of asking the court to set aside the agreement in limited circumstances. These circumstances are listed in section 90K of the Family Law Act. If such a challenge is successful (and remember, you must have an extremely valid reason to challenge the agreement), the solicitor is usually the easiest target to attribute the blame, and bear the brunt of the dissatisfaction of the party who was seeking to rely on the agreement.

So here’s the rub

Some lawyers won’t draft financial agreement because they believe the risks are too high for themselves (not you) and consequently those who have a higher appetite for risk charge a premium, often in direct proportion to the depth of the pockets of the client in order to cover the risk. That is, the greater the wealth of the client the higher the cost of the agreement.

This doesn’t necessarily mean that the agreement drafted to protect the assets of a wealthy individual is any more complex than that of someone of more modest means. Of course, that may be the case to a degree, but it is usually just the assets and liabilities statement that has a few extra lines to it.

So what do you do? Throw your hands in the air and do nothing? Run the gauntlet? Or is there another solution? Maybe put everything into a family trust? Unfortunately, when it comes to family law matters, assets you control but don’t actually own (such as those held in trust) all go into the pot if you do have to divide your financial resources.

Because family disputes and court action cost individuals and the community millions of dollars each year, successive governments via the Family Law Act have provided financial agreements as a vehicle to keep people out of the court system. They are the only option you have if you want to quarantine assets from future claim.

People are often motivated to preserve and protect assets for the benefit of children from a previous relationship. Used in conjunction with a sound estate planning strategy, a financial agreement may be the only option you have to minimise the chances of a challenge to your Will by a spouse under family provision legislation.

Of course, there are many other reasons why people might consider using a financial agreement.

The Family Court has demonstrated a willingness to see financial agreements upheld, where it can be demonstrated that the parties have been completely honest with each other and the lawyers have provided proper legal advice. As long as the agreement includes stringent compliance with legislative requirements, then any risks of a successful challenge are minimised.

With over a thousand agreements finalised through our Legal Review Service, we are yet to see a successful challenge (touch wood).

When you consider that the chance of a first marriage failing is somewhere between 35 and 40 percent and second marriages tend to be higher still, we believe the risks of not having an agreement in place far outweigh the risks of a successful challenge.

What do you think?

Do we have to lodge the financial agreement with the court?

No, you do not need to lodge the Financial Agreement with the Court or any other organisation.

Store your Financial Agreement in a safe place.  One party keeps the original agreement and the other party keeps a copy. You may wish to send a copy to your Solicitor.  You may also like to give a copy to your nearest friend or relative for safe keeping.  You can make as many copies of the Agreement as you like.

What rights do you lose once you have signed a financial agreement?

The beauty of using a  financial agreement is that you and your partner can decide on issues such as property distribution and spousal maintenance, instead of allowing the Court decide for you.

On the flip side, once you sign your agreement you no longer have the right to ask or apply to the Court to decide on the matters you have addressed in your Agreement. Essentially implementing a financial agreement closes the door to making any application to the court at a later date in order to deal with matters addressed in the agreement.

There are some special circumstances where you can ask the court to overturn a financial agreement, but you will generally need to find evidence the the other party has acted dishonestly in entering into the agreement or there is some form of duress or pressure being bought to bear to sign the agreement (when it was not in the parties best interest to do so).

 

What happens if one of us dies?

Your financial agreement will continue to operate despite the death of a party to the agreement and will operate in favour of, and will be binding on, the legal representative of that party.

Note that if the parties are still in a de facto relationship when one of them dies, the de facto relationship is not taken to have broken down for the purpose of enforcing the matters mentioned in the financial agreement.

Does the final binding financial agreement need to be witnessed by a JP?

Your agreement can be witnessed by anyone over the age of 18.  However, we do recommend the agreement is witnessed by a JP or other reliable witness such as a solicitor, police officer or court officer.

A JP is a high quality official witness whose main role is to witness the signing of documents.  They understand the ramifications involved and documents witnessed by a JP have a higher standing than those that have an unofficial witness.

What does it mean to set the agreement aside?

If a party to a financial agreement challenges the validity of the agreement in the court at a later date, the court can declare the agreement to be invalid, and set it aside.

An agreement can only be “set aside” in certain circumstances, and these are listed in the Family Law Act at section 90K (for married couples) and section 90UM (for de facto couples).  A court may only make an order setting aside a financial agreement if it is found that:-

  • the agreement was obtained by fraud, including non-disclosure of a material matter (where one party hides important information);
  • the agreement was entered into for the purpose of defrauding a creditor, or with reckless disregard for the interests of a creditor;
  • the agreement was entered into for the purpose of defrauding another person who is a party to a de facto relationship with a spouse partner;
  • the agreement is void, voidable or unenforceable;
  • circumstances have arisen since the agreement was made that make it impracticable for the agreement to be carried out (for example, the house burned down and the house was an integral part of the agreement);
  • since the making of the agreement, a material change in circumstances has occurred relating to the care, welfare or development of a child of the relationship, and as a result of the change, the child, or the applicant (if the applicant has caring responsibility for the child), will suffer hardship if the court does not set the agreement aside;
  • a party to the agreement engaged in conduct that was, in all the circumstances, unconscionable;
  • a payment flag is operating 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;
  • the agreement covers at least one superannuation interest that is an unsplittable interest.

It ‘s not easy to have an agreement set aside and a party must have a valid reason in order for the court to make an order to set an agreement aside.

Disclosure of Assets

disclosure of assets

Do I have to disclose details of all my assets in the financial agreement?

Yes, it is most important that you and your partner make full financial disclosure when making a financial agreement.  This is no different than other forms of formalising a property settlement, such as consent orders or court application.

It is vital that each party give fully informed consent to the Agreement.  If you hide information of a material matter, the other party’s consent may have been compromised – that is, would the other party still have consented to enter the agreement if they had known that information?  Material non disclosure creates an inherent weakness in the agreement, and gives the other party grounds to apply to the court to have the agreement set aside if they later become aware of the information, and decide they no longer wish to be bound by the agreement in it’s current form.

The court can only set aside an agreement in limited circumstances.  These circumstances are set out in section 90K of the Act for married couples, and is mirrored in section 90UM of the Act for de facto couples.

One of the circumstances in which the Court can set aside an agreement, is where one party induced the other party to enter the agreement by fraud.  Fraud includes the non disclosure of material (relevant) matters.  If a party fails to disclose the true extent or value of assets, then he or she leaves the agreement open to be challenged at a later date by the other party.

In addition, without a full and complete disclosure of the property pool, the solicitors will be unable to give accurate and meaningful legal advice as they are required under the Act, due to their incomplete knowledge of the asset pool in question.

What is non-disclosure of a material matter?

Each party to a binding financial agreement must make full disclosure of all material matters.  This is necessary to ensure that each party is giving fully informed consent to the agreement.  Any information which may have a bearing on a party’s decision whether or not to enter the agreement, must be disclosed.

Making full financial disclosure is also necessary to enable the solicitor’s to give full and meaningful advice to each party, as required by the Family Law Act.

Should full disclosure not be made, the agreement may be set aside on the basis that it was obtained by fraud, resulting from the non-disclosure of material information.

All relevant information must be disclosed.  This includes:-

  • identifying the asset pool;
  • placing values on the asset pool;
  • any other material information which would impact on the parties decision as to whether to enter into the Agreement.

In Barker & Barker (2007), the wife convinced the court to set aside consent property orders.  When making consent orders, each party has a similar obligation to make full and frank disclosure of all material matters.  The value of the family farm had been identified as $1.65 million.  However, before the consent orders were finalised the husband had received an offer to purchase the farm for $2.3 million, and shortly after the consent orders were finalised, he sold the farm for $2.65 million ($1 million higher than the amount disclosed in the consent orders).  The offer for $2.3 million was not disclosed to the wife.

Importantly, the offer was made before the consent orders where finalised.  The court considered that the offer of $2.3 million was relevant information, which should have been disclosed to the wife.  This information would likely have impacted the wife’s decision to agree to the terms of the settlement.

There is a line in the sand, and a party is not required to disclose every minute detail or trivial information.  Rather, the information which must be disclosed, is information which would likely impact on the other person’s consent to the terms of the property settlement.

In Livesay & Jenkins (1985) the court confirmed that not every case of failing to make frank and full disclosure will justify orders being set aside.  Disclosure of a relatively minor matter, or matters which would not have made any substantial difference one way or the other, are not enough to have a court set aside consent orders or a financial agreement.

What if we don't want to make full financial disclosure?

In order to rule out any potential challenge to your agreement in the future, and minimise any inherent weakness in your agreement, you must make full and complete disclosure of all relevant matters, including the nature and extent of the asset pool and relevant financial information.

The Family Law Act is very strict in requiring both parties to be upfront and transparent, and disclose any information at all which may be relevant to the agreement.  Section 90K states a financial agreement can be set aside for reasons of non-disclosure of relevant matters.

In addition, the parties to a financial agreement are agreeing to give up their rights to make a claim on the assets of the other, effectively ousting the jurisdiction of the court.  For this to be effective, it makes sense that you need to be aware of the assets which you are agreeing to give up your lawful rights to make a claim on.

The law does not allow the parties lightly to give up their lawful rights to access the court, which they otherwise would have.  The legislation goes to length to ensure that before signing the agreement, each party is aware of all material facts, understands the agreement and the effect of the agreement on their rights, and genuinely consents to the terms as a substitute for court action.

Disclosing the true value and extent of assets helps ensure each party has given their fully informed, genuine consent to the agreement.

You cannot contract out of this obligation to make full material disclosure, by including a clause in your agreement stating that neither party requires the other to make financial disclosure.  Ultimately, if full disclosure of all material facts is not made, a party may challenge the validity of the agreement at a later date, on this basis.

A court has the power to set aside your agreement if it is satisfied that disclosure has not been made of all relevant matters – so it makes sense to rule out this possibility, by making full and frank disclosure of all assets, liabilities and other material matters and rule out any inherent weakness in your agreement.

As discussed in the question above, a party cannot give their fully informed consent without knowing all of the material facts.  In addition, the solicitors are unable to give their clients the proper legal advice required by law without an accurate breakdown of the property pool.

About the Required Legal Advice

Legal advice

Can you change a financial agreement after it has been certified?

No.  If you have already received legal advice on your Agreement, you need to get current legal advice, taking into account the changes you want to make, before you can sign your Agreement.

If you have already signed and finalised your Agreement, unfortunately, you will need to make a fresh Financial Agreement which incorporates the changes you want, and contains a clause which terminates your old Agreement.  And yes, this means you will need to obtain fresh legal advice on your new Agreement with the changes, before you sign it.

Can we both use the same lawyer?

You must receive independent legal advice from a legal practitioner who does not act for the other party which means that you both can’t use the same lawyer.

This ensures that your legal practitioner will act in your best interests, and is unaffected by any competing or conflicting interests of your partner.

You should be able to safely and freely discuss your situation with your lawyer, knowing that any communications you have, will remain strictly confidential. See the article Should my Family Lawyer finalise my Financial Agreement?

What is a certificate of independent legal advice?

A certificate of independent legal advice is a statement by a lawyer that a party has received legal advice on certain matters, and that the lawyer is independent of and not associated with the other party.

In order for a financial agreement to be enforceable and binding, the Family Law Act stipulates that both parties must obtain independent legal advice and that certificates of independent legal advice (sometimes referred to as solicitor’s statements) be completed.

General

general faq

Should I use a financial agreement or consent orders?

If your relationship has ended, and you and your partner both agree on how financial issues should be dealt with, then either a financial agreement or consent orders may be used to formalise your agreement.

The main difference between the two options is that consent orders need the approval of the Court whereas financial agreements do not require any external approval. You can make your own private Agreement, as long as you both agree and it will be binding as long as you follow the requirements for obtaining the mandatory legal advice.

Putting a financial agreement in place is also less expensive especially if you use our tried and true system.

Can I restrict or waive child support in a separation agreement?

The ideal way to restrict or waive child support is by entering into a Child Support Agreement, made under the Child Support Assessment Act.

You could also use the Child Support Agreement if you have agreed with your ex-partner to increase child support or vary it in any way from the official Child Support Assessment.  You can request an Assessment of Child Support from the Child Support Office of the Department of Human Services.

Are de facto couples treated differently to married couples?

De facto couples are treated no differently than married couples. Under the Family Law Act, both de facto and married couples have the same rights.

The Family Law Act covers married couples in every state of Australia, and covers de facto couples for every state except Western Australia. De facto couples in W.A. are covered by the Family Court Act.

Can we include issues relating to the welfare and support of children?

Yes it is possible but there are a few rules. Firstly you cannot deal with children in an agreement unless they can be identified, so if they have not been born, you can’t identify them.

In relation to say a pre nup agreement where the parties have children from previous relationships, it is common for the couple to point out that each party will be responsible for the care and welfare of their own children and the other will not be required to support them.

Generally speaking in a separation type agreement issues relating to the care and support of children are best dealt with in separate documents to the financial agreement.

Issues relating to children can be charged with emotion and are generally dealt with by the courts if they cannot be resolved. By keeping these matters segregated from financial issues you remove the possibility that one party will try to have the agreement set aside because of a matter relating to the children.

What is meant by a material change in circumstances?

This wording is found in the Family Law Act at section 90K(1)(d):

“A court may make an order setting aside a financial agreement or a termination agreement, if and only if, the court is satisfied that:

(d)       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.”

This provision is mirrored for de facto couples, at section 90UM(1)(g).

The material change must relate to the care, welfare and development of a child of the relationship.

An example of this might be a young woman who entered into a pre-nuptial agreement, agreeing not to make a claim on the substantial assets of the husband.  The woman later fell pregnant and children were born.

The couple later separated, and the woman, who had caring responsibility for the child (or children), was required under the terms of the financial agreement to leave the residence owned by the husband and had no right on any of the assets of the husband.  All of the wife’s family resided overseas, she had no support and she was totally dependent on the husband during the marriage for accommodation, food and finances.

In this situation, the birth of children to the relationship was a significant change, and both the children, and the mother, who had caring responsibility for the children, would suffer hardship if the agreement was carried out.

It is wise to review your financial agreement periodically, particularly when children are born or other major changes within the relationship occur, to ensure that the agreement remains relevant to your circumstances.

What is meant by the agreement is void, voidable or unenforceable?

Generally, this is an agreement which is illegal, not properly made, or made by the exertion of illegitimate pressure from one party to the other, such as duress.

Examples include where:-

  • the capacity of a party to the agreement was compromised;
  • the agreement contained illegal terms;
  • the terms of the agreement are uncertain or ambiguous, so that the meaning is not known; or
  • a party induced the other party to sign the agreement by illegitimate force, pressure, undue influence, fraud, misrepresentation or duress.

What is duress?

Duress refers to the use of illegitimate pressure or force to make someone act in a way that is against his or her wishes or interests.  Duress may include actual or threatened violence, harm, threats, or force.  Duress may overlap with, or contain elements of, unconscionable conduct, which is where one party has a position of power over the other, and they abuse that power to influence the weaker party.

It goes without saying that if duress is used to force someone to sign a financial agreement, the Court would most likely order the agreement to be set aside under section 90K (married couples) or section 90UM (de facto couples).  Both parties must genuinely consent to the agreement, free of duress or other undue or illegal pressure.

An example of this is found in the case of Blackmore and Webber.  The husband produced a financial agreement 5 days before the wedding to his Thai fiance.  She was 4-5 months pregnant and totally dependent upon the husband in Australia, without any other support, financial or otherwise.  She had previously refused to sign a pre nuptial agreement.  However, the husband produced the agreement 5 days before the wedding date, threatening that unless she signed the agreement, the wedding was off.  This meant she would have to return to Thailand, unmarried and pregnant, carrying a huge social stigma.

The Court found that the husband knew the wife did not want to sign the agreement, but the way in which he presented the agreement to her, 5 days before the wedding, and knowing the ramifications it would result in if she chose not to sign it, amounted to duress.

Note:  For this reason we recommend pre nuptial agreements are finalised well in advance of the wedding date, to avoid any conduct which may be viewed as pressure or duress.

What does it mean to set the agreement aside?

What is meant by the agreement was obtained by fraud?

Section 90k of the Family Law Act  states that a court may set an agreement aside if the agreement was obtained by fraud.

What is meant by “the agreement was obtained by fraud”?

If one party induced another to sign the financial agreement based on dishonest representations, then the agreement was obtained by fraud.  This includes suppressing relevant information that would impact on a parties’ decision as to whether or not to enter into the agreement.

For example, Parker has asserted that the value of the matrimonial home is $500,000.  Natalia has agreed to being paid $250,000 (a half share) to transfer her share of the house to Parker.  Parker had in the recent past received professional valuations, valuing the house at $750,000 and he knows that similar houses have sold for around $750,000 in the immediate area.  Parker does not disclose this information to Natalia, and she signs the agreement on this basis.  The information that Parker has withheld is relevant to Natalia’s decision as to whether or not to enter into the agreement.

The failure to make full and complete disclosure of all material matters constitutes fraud.

The case of  Barker & Barker (2007), is similar to the example discussed above, in that  the wife convinced the court to set aside consent orders, because the value of the family farm had been disclosed as $1.65 million.  However, before the consent orders were finalised the husband had received an offer to purchase the farm for $2.3 million, and shortly after the consent orders were finalised, sold the farm for $2.65 million.  The husband had not disclosed the offer of $2.3 million to the wife.  The offer was not known to the wife.

The Court found that the agreement was obtained by fraud because the husband had an obligation to disclose the offer, as it would have affected the wife’s decision as to whether or not to enter into the agreement.

Other instances of fraud might be:-

  • hiding assets;
  • not disclosing the true value of assets;
  • failure to disclose other material information which would impact on a person’s decision to enter into the Agreement; or
  • deceiving the other party in some way, in order to induce them to sign the agreement.

Section 90k of the Family Law Act states that a court may set an agreement aside, if it is satisfied that the agreement was obtained by fraud.

What is unconscionable conduct?

Section 90K of the Family Law Act  states that a court may set a financial agreement aside if it is satisfied that party to the agreement engaged in conduct that was, in all the circumstances, unconscionable.

What is unconscionable conduct ?

Unconscionable conduct refers to taking advantage of a “special disadvantage” of the other party.  The special disadvantage is usually more than an imbalance of bargaining power.  There may also be elements of undue influence, fraud, pressure or duress, which commonly overlap.

In Blackmore and Webber the Court concluded that the husband took unconscionable advantage of his wife’s “special disadvantage”.

The wife was totally dependent on the husband for all her needs, including her accommodation, food and financial needs.  She was from Thailand, and living in Australia without any other support.  She was also 4-5 months pregnant.

The husband knew that the wife did not wish to sign a financial agreement.  However, he had a financial agreement drawn up without consulting the wife, and presented it to her 5 days prior to the wedding.  He threatened that unless she signed the agreement, the wedding was off, with all the ramifications this involved for the wife, including returning to Thailand, unmarried, pregnant and without support, financial or otherwise.

The Court found that the husband knew the wife did not want to sign the agreement, and the way in which he presented the agreement to her, realising her special disadvantage, amounted to unconscionable conduct.  This was in addition to the court’s finding of duress.

It is crucial that both parties give their genuine consent to the agreement.

Unconscionable conduct is a ground to have an agreement set aside by the Court under section 90K (married couples) or section 90UM (de facto couples).

What is meant by in 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?

This wording is found in the Family Law Act at section 90K(1)(c):

“A court may make an order setting aside a financial agreement or a termination agreement if, and only if, the court is satisfied that:

(c)     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.”

This gives the court the power to set aside a binding financial agreement, if, since the agreement was made, a change of circumstances makes it impracticable (sometimes impossible) for the agreement to be carried out.

For example, if the house burns down, and the house was integral to the agreement (or other major assets that were integral to the agreement, now no longer exist), the court may set the agreement aside (end the agreement).

To provide a real life scenario based on this example. Let’s say Joseph and Simone have signed a financial agreement, in which it is agreed that Joseph would keep the residence (valued at $500,000) and Simone would retain shares and investment funds totaling $500,000.  Now the house has burned down, and the land is only worth $110,000.  It would be unfair to enforce this agreement, due to the change of circumstances.

Another example might be where a house, which was integral to the agreement, had long been sold and the proceeds had been invested into the family business.

In these events, the court may set the agreement aside in consideration of the circumstances that have arisen since making the agreement, that make it impracticable for the agreement to be carried out.

De facto Relationships

Are de facto couples treated differently to married couples?

De facto couples are treated no differently than married couples. Under the Family Law Act, both de facto and married couples have the same rights.

The Family Law Act covers married couples in every state of Australia, and covers de facto couples for every state except Western Australia. De facto couples in W.A. are covered by the Family Court Act.

How do I know if I’m in a de facto relationship?

A de facto relationship is defined in section 4AA of the Family Law Act.  It is a relationship that two people who are not married or related by family have as a couple, living together on a ‘genuine domestic basis’.  It can exist between two people of the opposite sex, or between two people of the same sex.  Your relationship is not a de facto relationship if you are legally married to each other, or if you are related by family.  All the circumstances of the relationship will determine whether a couple are in a de facto relationship.  These include:

  • the nature and extent of the common residence;
  • the ownership, use and acquisition of any property;
  • whether a sexual relationship exists;
  • the degree of financial dependence or interdependence and any arrangements for financial support of one and other;
  • the duration of the relationship;
  • the degree of mutual commitment to a shared life;
  • whether the relationship has been registered, in a state or territory with laws for the registration of relationships;
  • the care and support of children;
  • the reputation and public aspects of the relationship.See this article for more information on de facto relationships in Australia

What is a de facto couple wants to get married?

It’s not unusual for de facto couples to get married after they’ve been living together for a while.  In this case, they want to know whether their cohabitation agreement will suffice, or if they will need to enter into another agreement (usually a pre nuptial or post nuptial agreement).

Essentially, a de facto agreement and a prenuptial or post nuptial agreement are not the same thing.  Even though de facto couples and married couples have essentially the same rights, the Family Law Act deals with married and de facto couples separately, under different sections of the Act.  This means that you cannot rely on a de facto agreement if you later marry.  You will come under Part VIIIA  for married couples (rather than Part VIIIAB for de facto couples).

You do, however, have the option to enter into a new agreement that will cover the marriage relationship.  This also gives a couple the opportunity to review any prior de facto agreement, particularly in light of changes (or anticipated changes) to the relationship, such as the  arrival of children and the resulting change to the relationship dynamics.  In any event, it is recommended that you review your financial agreement regularly, regardless of a change in status of the relationship.

When considering whether to make a de facto or marriage financial agreement, there are a two important factors to consider.  The first is that a cohabitation or de facto agreement deals with what should happen if the de facto relationship breaks down.  If the couple marries, the de facto relationship has not broken down, making the de facto agreement void.  It simply ceases to be applicable.

The second factor is a reversal of the first, in that a pre nup agreement (being a pre marriage agreement made under the marriage provisions of the Act), will offer no protection if you are currently in a de facto relationship and you separate before the marriage actually takes place.  That is, if you’re planning on getting married, and are currently living together in a de facto relationship, you need to be aware that a pre nup agreement (pre marriage agreement) will only come into effect once the marriage takes place.  So making a pre nup with the intention that it will also protect you during the course of your de facto relationship prior to the wedding, is not accurate.

Are Prenuptial Agreements and Cohabitation agreements the same?

Pre-nuptial Agreements and Cohabitation Agreements are essentially types of Financial Agreement but they are not interchangeable. That is you can’t use a prenup in place of a cohabitation agreement and vice versa.

When someone refers to a Pre-Nuptial Agreement, it is generally understood to mean a Financial Agreement made before marriage.  Likewise, a Cohabitation Agreement is also a Financial Agreement, but it is made by a couple in a de facto relationship.  Both are Financial Agreements, and deal with similar matters – namely how the property and financial resources of the parties are to be distributed if the relationship should break down in the future.  Financial Agreements can also specify whether or not spousal maintenance is to be paid.

Sections 90A-90Q of the Family Law Act deals with Financial Agreements made by married couples (or couples about to marry).  Sections 90UA to 90UN deals with Financial Agreements made by de facto couples (or couples about to enter a de facto relationship).

When it comes to the law, de facto relationships (same sex or otherwise) and marriages are viewed equally. Both de facto relationships and married couples have the same legal rights and entitlements pursuant to the Family Law Act 1975.

 

What rights do same sex couples have?

Section 4AA of the Family Law Act sets out a definition for de facto couples regardless of gender or sexual orientation:-

Meaning of  de facto relationship

A person is in a  de facto relationship with another person if:

  • the persons are not legally married to each other; and
  • the persons are not related by family (see subsection (6)); and
  • having regard to all the circumstances of their relationship, they have a relationship as a couple living together on a genuine domestic basis.

For the purposes of this Act, a de facto relationship can exist between 2 persons of different sexes and between 2 persons of the same sex.

So, for all intents and purposes there is no discernible difference between same sex and heterosexual de facto couples.

Rights of same sex couples in property settlement

In relation to property settlement, the law and the courts treat all couples equally, be they married, de facto or same sex couples.

They each hold the same right to have a court decide on how to divide the property pool, just like any married couple.  This includes splitting of superannuation interests and spousal maintenance.

Furthermore, de facto partners are recognised under family provision legislation, and treated like any other married couple.  For example, if  one partner were to pass away and  it can be demonstrated that the parties were living in a close personal relationship at the time of the deceased person’s death, the surviving partner can apply to the Court for a share of the deceased person’s estate if they had been dependent on the deceased partner.

Under other state and federal laws, there are certainly inconsistencies, but the Family Law Act (Cth) and the Family Court Act 1997 (WA) do not discriminate when it comes to married, de facto or same sex couples.  All are treated equally.

Marriage or Getting Married

wedding day

Should I get a prenup?

Should I get a Prenup? Before we proceed, I just want to make it clear that under Australian Family Law the correct name for a Prenup is a Financial Agreement. Financial agreements can be made before, during or after a relationship. –

At present if you want to protect, or shall we say quarantine certain assets from spousal claim, the only choice you may have is to get a prenup (financial Agreement).  They allow couples to decide how their assets will be handled at the beginning of the relationship, should the relationship break down at some time in the future.

In a Financial Agreement, both parties give up the rights they would otherwise have under the Family Law Act to apply to the Court for the division of the asset pool.  Instead, the couple make their own agreement about how assets will be dealt with up front, both during the course of the relationship, and in the event that the relationship comes to an end.

Whether a prenup is absolutely necessary would depend very much on your personal circumstances. If you need to protect assets then you may consider it necessary but if you don’t need to protect assets then you might not. Remember too that it’s not just about assets – you may want to quarantine debt. – Read more

Are prenups legal?

Yes, prenups are legal, although in Australia they are called “Financial Agreements” which are made before marriage.  The Family Law Act 1975 (the Act)  gives couples the option to enter into a legally binding Agreement in relation to how assets are to be dealt with should the relationship break down and the marriage come to an end.

Section 90B of the Act deals with Financial Agreements made between people who are contemplating entering into a marriage.

As long as the parties to the agreement comply with Section 90G of the Act, the financial agreement will be binding on the parties.

Separation

Should I use a financial agreement or consent orders?

If your relationship has ended, and you and your partner both agree on how financial issues should be dealt with, then either a financial agreement or consent orders may be used to formalise your agreement.

The main difference between the two options is that consent orders need the approval of the Court whereas financial agreements do not require any external approval. You can make your own private Agreement, as long as you both agree and it will be binding as long as you follow the requirements for obtaining the mandatory legal advice.

Putting a financial agreement in place is also less expensive especially if you use our tried and true system.

Can I restrict or waive child support in a separation agreement?

The ideal way to restrict or waive child support is by entering into a Child Support Agreement, made under the Child Support Assessment Act.

You could also use the Child Support Agreement if you have agreed with your ex-partner to increase child support or vary it in any way from the official Child Support Assessment.  You can request an Assessment of Child Support from the Child Support Office of the Department of Human Services.

What about child support and parenting arrangements?

We recommend you first speak to the Child Support Assessment Office, which is part of the Governments’ Human Services Department, and request a child support assessment.  This will tell you how much child support you are legally entitled to receive from your partner, or how much child support you will need to pay your partner.

If you both agree, you can vary this amount, by either increasing or decreasing it.  You can do this by either:-

  • a private arrangement, agreed between yourselves.  For example, your ex-partner can agree to pay an extra $100 to your account each week, above and beyond his or her payment obligation under the Assessment Notice.  Note, however, that your partner will not be legally bound to pay the extra amount, only the assessment amount;
  • alternatively, you could enter into a binding child support agreement.  This makes any changes to the assessment amount legally binding.  You can find out more about child support agreements here.

You may also choose to enter into a written, informal agreement documenting your agreement on details relating to the care and well being of the children.  This may include specifying swap over days and the times which children spend with each parent, schooling arrangements, contact with relatives, and other issues.  An ideal way to record your understanding on these issues and help ensure both parents are operating from the same page, is to make a parenting plan.  For more about parenting plan, click here.

Who pays stamp duty on property transfers?

Stamp duty and capital gains tax liabilities may come into play when property is transferred from one partner to another, such as the matrimonial home or investment property, during a property settlement.  However, if the couple have entered into a binding financial agreement that deals with the property transfers before the date of the transfer, the parties will be exempt from paying stamp duty and capital gains tax.

The stamp duty exemption and CGT concessions are made available under state and territory legislation if the transfer is made under a financial agreement, irrespective of whether the parties are married or in a de facto relationship.  The exemptions on stamp duty and CGT under financial agreements are only applicable if the transfer of property, whether it is real property or a motor vehicle, is specifically referred to in the agreement.

To enable the exemption to be processed, the Office of State Revenue must sight a copy of the financial agreement at the date of assessment.

Are there time limits to make a claim if separating?

There is only one major difference in the law regarding married and de facto couples. When separating property, married couples have 12 months from the date of their divorce to apply to the court for property orders. De facto couples have 24 months from the date of their separation. If parties do not comply with their statutory time limits they are required to seek the court’s permission to apply out of time. This is not always granted.

No time limits apply to parties who wish to finalise their property settlement by making a binding financial agreement, which can be made at any time either before entering into the relationship, during the course of the relationship or after separation or divorce.

Am I legally separated from my spouse?

You can separate by moving out of the shared home, or by separating “under the one roof”.

A couple may choose to separate “under the one roof” for financial reasons, or in anticipation of the family home being sold or transferred, which will give each party the funds to then move forward.  Regardless of where the parties are living, the key issue is that the parties physically separated, and thereafter lived separately and apart.  If a couple is still residing under the one roof, this may involve moving into separate bedrooms and separating finances.

It may be difficult to determine whether a couple is legally separated under the one roof, or simply experiencing relationship difficulties.  The court has given some guidance on this, by confirming that when a couple has separated under the one roof, there should be:-

  • an intention, by one, or both, parties to end the relationship;
  • communication of this intention to the other party; and
  • acting on this intention with some sort of follow up action, such as moving into separate quarters and separating your financial affairs.

You should note the date which you formally separated, as this date will be needed to notify various government departments, such as Centrelink, the Child Support Office, and, if you later decide to file for divorce, the Family Court.  These organisations may require documentary proof, such as a signed affidavit or statutory declaration.

It is important to note that a binding financial agreement will only take effect in relation to certain matters (such as how property is to be divided upon separation), when a separation declaration is signed.

In a separation declaration, the parties confirm that they have legally separated and are living separately and apart (this includes being separated “under the one roof”).

If need be, the separation declaration can be signed by only one party, although it can be signed by both parties if convenient and possible.

A separation declaration is provided in the separation and divorce financial agreement kits for married couples, and the de facto separation financial agreement kit, for de facto couples.