Amendments to the Family Law Act 1975 (the
"Act") took effect in December 2000 which permitted
couples contemplating marriage to enter into a binding financial
agreement ("BFAs") before the marriage to determine how
their property would be divided in the event of their marriage
subsequently breaking down.
Up until this significant amendment to the Act, the Family Court
paid little regard to what were colloquially known as pre-nuptial
agreements as they were not binding under the Act.
Now, provided that the BFA has been entered into properly, which
includes each party disclosing the assets in which they have an
interest and obtaining independent legal advice, only in very rare
cases will the Court set aside such an agreement.
BFAs can be entered into either before, during or after
marriage. They can be prepared to include either all, or only
certain specific assets and resources in which the parties may have
Agreements of this type are particularly attractive to someone
who has worked hard to acquire some wealth, even if limited to
superannuation, and are also useful for those contemplating
marrying for a second time who want to secure for themselves and
their children assets that they have acquired up to that point.
Another benefit of entering into a BFA is that it provides
certainty for parties as to how the assets are to be divided in the
event of a marital breakdown. In disqualifying the Family Court
from determining how the assets are to be divided in the event of a
marital breakdown, the stress and significant costs that are often
a consequence of Family Court litigation are avoided.
Because BFAs can be entered into after a marriage has broken
down, they can be used as an alternative to filing consent orders
in the Family Court. They have the same binding effect as orders
made by the Court. The significant difference is that whereas
orders made by the Family Court must be vetted by the Court, and
will not be approved unless they are "just and
equitable", there is no such requirement with BFAs. Provided
that all requirements in making a BFA are satisfied, which includes
each party fully disclosing their assets, there being no element of
duress or coercion, and that each party has seen their own lawyer
who signed a certificate attached to the agreement, the agreement
does not have to be "just and equitable" as is required
before an order is made by the Family Court.
Further recent changes to the Act have made these types of
agreements even more attractive. From December 2006 the Act was
amended to provide for marriage or defactobreakdown capital gains
tax roll-over relief to be extended to transfers of property or
shares under BFAs. Until this change BFAs did not enjoy capital
gains tax rollover relief, however they now enjoy the same
advantages as transfers under a Court order.
Another significant amendment has now taken place with the
introduction in Victoria of the Relationships Act (2008).
Until December 2008 BFAs did not apply to heterosexual or same-sex
couples living in de-facto relationships in Victoria. Such couples
are now able to order their affairs, as with married couples, by
entering into financial agreements as a result of the newly
introduced Relationships Act. This legislation, which
represents one of the more significant changes to the landscape of
relationships law since the introduction of the Family Law Act in
1975, has also introduced significant changes to parties'
entitlements arising from the breakdown of de-facto, same-sex and
BFAs need to be drafted to suit your particular circumstances,
as there is no "one size fits all". They are, however,
worth serious consideration if you are planning to cement your
relationship by either commencing to live together, or if you are
considering marriage, particularly if you have acquired assets that
you would like to protect before making that commitment.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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