A binding financial agreement is similar to a prenuptial agreement. It is a contract between a married or de facto couple that sets out how their finances will be separated if their relationship ends.
The Family Law Act 1975 (Cth) contains a provision which facilitates this agreement.
This financial agreement can be made before, during and after the marriage or de facto relationship. But for it to be legally binding, both parties must sign it and have acquired legal advice prior to doing so. The legal advisor should inform parties of the advantages and disadvantages of such an agreement and sign a certificate which states that advice was provided to the parties.
The agreement can cover the division of property and finances, financial support, maintenance of one party after the breakdown of the relationship, and any incidental issues.
The most common reason to enter such a financial agreement is to protect assets an individual owned before getting into the relationship. This allows a distinction between personal and jointly owned assets. Such an agreement also allows parties to protect future income that they may receive through inheritances or investments.
Any allocation of debts such as loans or mortgages can also be made under this agreement, preventing shared liability for a personally owned asset. A comprehensive agreement will reduce costly court proceedings by minimising conflict if the relationship fails.
It may be difficult to discuss such an agreement, especially at the start of a marital or de facto relationship but it is ideal for partners who prefer to keep ownership and responsibilities of their assets separated.