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 an interest.

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 heterosexual relationships.

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.