Prenup Australia: Everything You Need To Know About Prenuptial Agreements

When you’re planning your future with someone, there are many things to consider: shared dreams, mutual goals, and, hopefully, a lifelong commitment. But as much as we hope for happily-ever-after, life can sometimes take unexpected turns. This is where a prenup (or a Binding Financial Agreement, as it’s called in Australia) comes into play.

A prenup isn’t just for the wealthy or for those who expect their relationship to fail. It’s a practical, proactive step for anyone wanting to protect their financial interests, whether you’re marrying for the first time or the third. Imagine you’re entering a relationship with your financial house in order—things like your home, your business, and savings. You’ve worked hard for what you’ve got, and the thought of losing it all in the event of a breakup can feel unsettling.

Let’s see what a prenup in Australia entails, how it can benefit you, and why you shouldn’t dismiss the idea because it seems too “unromantic” or “unnecessary.” It’s more common than you think, and it might be exactly what you need to enter your relationship with financial clarity and peace of mind.

What Is A Prenup And Why You Need One In Australia

Prenup Meaning And Overview

A prenup is often viewed as something only celebrities or the ultra-wealthy consider before marriage. But in reality, prenups in Australia are a powerful tool for anyone who wants to secure their financial future. Known legally as a Binding Financial Agreement (BFA), a prenup is a formal contract between two people that outlines how assets and debts will be divided in the unfortunate event of a relationship breakdown.

The significance of a prenup goes beyond just dividing assets. It’s about ensuring that both parties understand their financial rights and obligations. Consider the case of Tanya and Mark, who had been living together for three years before getting engaged. Tanya had a family business, and Mark was bringing his retirement savings into the relationship. 

By creating a prenup, they were able to protect their individual assets while also agreeing on how any future investments would be shared. It gave both of them peace of mind—something that would have been sorely missing had things gone wrong.

It’s important to note that in Australia, Binding Financial Agreements (BFAs) are not just for couples about to get married. They can also apply to those entering de facto relationships, as well as to married couples who want to establish a clear financial framework, even after they’ve tied the knot.

How Prenups Are Used In Australia

In Australia, a prenup isn’t just limited to engagements or marriages. It’s a practical tool that can be applied to a variety of situations. Here’s a breakdown:

1. Before Marriage (Traditional Prenup):
   If you’re planning to get married, a prenup lets you settle on how assets will be distributed before the big day. For example, Sarah, a lawyer in Sydney, was about to marry Tom, a property developer. Sarah had inherited her family home and didn’t want to risk losing it if their relationship didn’t work out. By creating a Binding Financial Agreement, she protected her inheritance from any future division.

1. During Marriage (Postnup):
   In some cases, a couple might decide to enter into a postnuptial agreement (postnup) after they are already married. This is a flexible option if circumstances change—like receiving a large inheritance or starting a new business venture. It’s more common than many think; it allows couples to adjust their financial arrangements without going through a divorce.
2. De Facto Couples (Including Same-Sex Couples):
   Whether you’re living together or planning to move in together, a prenup is equally valid for de facto couples. For instance, David and Jack, a same-sex couple living in Melbourne, decided to formalise their financial arrangements before buying a house together. With a prenup, they could set out how any shared property would be divided if they ever separated.
3. Separated or Divorced Couples:
   A prenup isn’t just for people who are starting a relationship. If a couple is separating or divorcing, a Binding Financial Agreement can be used to settle property matters without going to court. This can save time, money, and stress. John and Lisa, who had been married for 15 years, found that a BFA helped them reach an agreement quickly on property distribution, allowing them to both move on without lengthy court battles.

Who Can Enter A BFA?

Couples, De Facto Partners, And Beyond

If you’re thinking about entering into a Binding Financial Agreement (BFA), it’s important to know who can create one. The beauty of a BFA is that it’s available to various types of relationships:

• Couples intending to marry: If you’re engaged and want to set clear terms for asset division, a prenup is a proactive step.
• Married couples: A BFA can also be created during the marriage—whether you’re planning ahead or adjusting your finances as circumstances change.
• De facto partners: Whether you’re in a heterosexual or same-sex relationship, a BFA can apply. It’s just as vital for couples who aren’t married but want to ensure that their financial interests are protected.
• Separated or divorced couples: Even after a relationship has ended, a BFA can formalise a property settlement, making it legally binding without going to court.

For example, Melanie and her partner Ben had been living together for five years before deciding to buy a property. They both brought separate assets into the relationship, but when they entered into a Binding Financial Agreement, they ensured their investments would be protected should their relationship end. 

The agreement was clear and legally binding, offering both of them the reassurance they needed.

What Does A Prenup Cover?

What’s Included In A Prenup (BFA)

One of the major advantages of a prenup (or Binding Financial Agreement, as it’s legally recognised in Australia) is its flexibility. It’s highly customisable, allowing couples to tailor the agreement to their specific needs and circumstances. The agreement can cover various aspects of your financial situation, ensuring clarity and protection for both parties involved.

So, what exactly can a BFA include?

1. Real Estate: This could be property that one or both parties own before entering the relationship or property acquired together during the relationship. For instance, if you’ve inherited a family property or bought a home before your partner came into the picture, a prenup can ensure it’s excluded from future division if things don’t work out.
2. Bank Accounts and Investments: Any joint accounts or investments can be addressed. A prenup ensures that there’s no ambiguity about who owns what if the relationship ends.
3. Business Interests: If one or both partners own businesses, a prenup can outline what happens to those assets in the event of a breakup. This can protect your entrepreneurial ventures and help ensure that the business remains intact.
4. Superannuation (Retirement Savings): Superannuation is a major issue in Australian marriages and relationships. A prenup can clearly outline how superannuation funds will be divided. This is especially important given that superannuation is often a couple’s largest financial asset. For example, John and Sarah had a Binding Financial Agreement that ensured John’s superannuation would remain his if their marriage ended, as he had accumulated it before they married.
5. Spousal Maintenance: In some cases, the prenup can include agreements around spousal maintenance, which refers to one partner financially supporting the other after a relationship breakdown. While this isn’t always the case, it can be discussed and agreed upon in the prenup.
6. Debts: If either party has significant debts, a prenup can determine who is responsible for those debts should the relationship dissolve. This ensures that one person isn’t left with an unfair financial burden.

It’s essential to have a frank and open discussion about these issues with your partner before getting into a Binding Financial Agreement. Remember, the goal isn’t just to protect your assets—it’s to provide both parties with clarity and reduce the potential for future conflict.

What’s Excluded From A Prenup (BFA)

While a Binding Financial Agreement can be highly comprehensive, there are certain things it cannot cover. Understanding these limitations is just as important as knowing what’s included.

1. Child Custody and Parenting Arrangements: The biggest limitation of a BFA is that it cannot include provisions for child custody or parenting arrangements. These matters are entirely separate and must be addressed through other legal means, such as a Parenting Plan or Consent Orders.

For example, if a couple with children splits up, the BFA might sort out the property, but it won’t dictate who gets the kids or how much child support is to be paid. This is why it’s important for parents to separate financial matters from child-related decisions.

1. Child Support: A prenup cannot include details about child support, which is handled separately by the Child Support Agency or the courts. These agreements are typically based on the parents’ income and the child’s needs.

It’s important to note that if the terms of the BFA would result in significant hardship for a child or the primary carer, the Family Court could review and potentially set aside the agreement. This is a safeguard to ensure that children’s welfare always comes first.

So, while a prenup can be incredibly useful for financial protection, it’s not a tool for determining custody or child support arrangements. In these cases, you’ll need separate legal agreements or court orders.

How To Make A Prenup Legally Binding In Australia

Legal Requirements For A Valid BFA

Creating a Binding Financial Agreement (BFA) is not as simple as just drafting up a document with your partner. For a prenup to be legally enforceable in Australia, strict requirements must be met.

Here are the key conditions that must be satisfied:

1. In Writing: The agreement must be in writing. This is non-negotiable. Verbal agreements or informal arrangements won’t stand up in court.
2. Independent Legal Advice (ILA): This is the most crucial aspect of ensuring your BFA is legally binding. Each party must seek independent legal advice from their own solicitor. The lawyer’s role is to explain the legal effects of the agreement and ensure that both parties understand what they’re signing. For instance, if Tanya and James entered into a prenup, both would need to consult with their own lawyers to ensure they are fully aware of their rights and the potential consequences of signing.
3. Signed Certificates of Advice: After providing advice, the lawyer will issue a certificate confirming that the party received proper legal counsel. Without this, the BFA is likely to be deemed invalid.
4. Full Financial Disclosure: Both parties must provide a complete and honest disclosure of their assets, liabilities, and income. Hiding assets or failing to provide full disclosure is one of the quickest ways to invalidate a prenup. For example, if Steve hid his investment property from Julia during the BFA process, the court could throw out the agreement.
5. Voluntary Execution: The agreement must be signed voluntarily, without any coercion, undue pressure, or threats. If there’s evidence that one party was forced or coerced into signing the BFA, it could be challenged in court.

The Role Of Independent Legal Advice

Independent legal advice is one of the cornerstones of a Binding Financial Agreement in Australia. Each party needs to consult their own lawyer before the agreement can be signed. The lawyer’s job is not to represent both parties but to explain the terms of the agreement in detail and make sure that both parties understand what they’re agreeing to.

For example, if Emma were entering into a prenup with Tim, she would meet with her own lawyer, who would review the agreement, explain her rights, and highlight any potential downsides. The lawyer would also provide her with a certificate confirming she was adequately advised.

This step ensures that both parties are aware of the BFA’s legal implications, protecting them from future claims that they didn’t fully understand the document they signed.

The Cost Of Creating A Prenup In Australia

Estimating The Cost Of A Prenup

When creating a Binding Financial Agreement (BFA), costs can vary depending on the complexity of the assets and financial matters involved. Some couples may have straightforward arrangements, while others may have significant investments, businesses, or trust structures that require more detailed legal work.

In general, you can expect the costs to fall into a few broad categories:

• Standard Agreements: These are relatively simple agreements that deal with basic asset division, such as real estate, savings, and personal property. For these types of agreements, you might pay anywhere from $3,000 to $10,000 for both parties.
• Complex Agreements: If your financial situation includes complicated assets, such as trusts, family businesses, or multiple properties, the cost of creating a BFA will be higher. These agreements can range from $15,000 to $20,000 or more.
• Fixed Fees: Some legal firms offer fixed fees for drafting and reviewing BFAs. For example, a firm might offer a fixed price of $2,200 for drafting and $990 for an independent review and certification.

It’s important to remember that the cost of the prenup will likely be a fraction of what legal fees and court costs could cost if the relationship ends and there’s no prior agreement in place.

Table: Estimated Costs for Binding Financial Agreements

Type of Agreement	Estimated Cost (for Both Parties)
Standard Agreements	$3,000 – $10,000
Complex Agreements	$15,000 – $20,000+
Fixed Fees (Drafting + Review)	$2,200 (drafting), $990 (review)

Value Vs. Cost: Why It’s Worth The Investment

While the cost of a Binding Financial Agreement may seem significant, especially for complex agreements, it’s important to consider the potential costs of not having one. The breakdown of a relationship, particularly when complex financial arrangements are involved, can lead to lengthy and expensive court battles.

Take the example of Greg and Lucy, who had a property portfolio worth millions. Without a prenup, their relationship broke down after 12 years. The legal fees for sorting out their property division and other financial matters totalled over $100,000 and dragged on for months. If they’d set up a BFA early on, they would have saved both time and money.

A BFA provides clarity and certainty, which can ultimately help save money in the long run.

Why A Prenup (BFA) Might Be Set Aside

Common Reasons Prenups Are Overturned In Australia

While Binding Financial Agreements are legally enforceable in Australia, they aren’t invincible. The Family Court can overturn a BFA under certain circumstances. It’s essential to understand these situations to avoid having your prenup challenged later on.

Here are the most common reasons a prenup could be set aside:

1. Fraud or Misrepresentation: If either party fails to disclose a significant financial asset or liability, or if one party intentionally hides information during the process, the BFA may be overturned. For example, imagine Jane had a secret savings account that she didn’t disclose during the prenup negotiations. If this were discovered later, the agreement could be invalidated.
2. Unconscionable Conduct: If one party took advantage of the other’s vulnerable situation, such as signing the agreement under duress or pressure, the agreement could be invalid. A famous case in Australia highlighted this issue when a woman was forced to sign a prenup just days before her wedding, under the threat that the marriage would be called off if she didn’t.
3. Material Change in Circumstances: If the circumstances that led to the agreement change significantly, such as the birth of a child, the agreement may be reconsidered. For example, if a BFA severely disadvantages a child or the primary carer, the Family Court may determine that it’s not fair or reasonable.
4. Impracticability: If unforeseen events make it impossible to perform the agreement, the court may set it aside. An example of this could be if a BFA stipulated that certain assets be divided, but those assets were destroyed in an unforeseeable event, like a natural disaster.

How To Ensure Your BFA Stands Up In Court

To increase the chances that your Binding Financial Agreement stands up in court, make sure that:

• You fully disclose all financial assets, debts, and resources.
• The agreement is fair and reasonable at the time it is signed.
• Both parties receive independent legal advice from their own solicitor.
• The agreement is entered into voluntarily, without any coercion or undue pressure.

By following these guidelines, you can significantly reduce the likelihood that your prenup will be challenged later.

Superannuation Splitting In Prenups: A Critical Element Of Asset Division

What Is Superannuation Splitting?

In Australia, superannuation (or super) is often one of the largest assets in a relationship, especially when you factor in the compound growth over time. So, it’s no surprise that superannuation splitting is a key component of many Binding Financial Agreements.

Superannuation splitting refers to the process of dividing superannuation between two parties in the event of a relationship breakdown. Unlike other assets, super is typically not accessible until retirement age, so it’s crucial to address how this asset will be divided, particularly when one party has accumulated more super than the other.

For instance, consider Lisa and Peter. Lisa had a substantial super balance from her years working as a lawyer, while Peter’s super was relatively modest. They decided to include superannuation splitting in their prenup and agreed to a fair division based on their contributions during the relationship. If they were to separate, each would receive an agreed portion of the other’s super fund.

The Legal Process For Superannuation Splitting

The process of splitting superannuation under a Binding Financial Agreement involves formal steps. Typically, superannuation can be divided through a splitting order or a superannuation agreement that forms part of the BFA.

Here’s a simplified breakdown of the steps:

1. Super Fund Agreement: Once the BFA is signed, both parties will submit a request to their superannuation funds, detailing the division of the funds.
2. Court Approval: In some cases, the Family Court may need to approve the agreement, particularly if children are involved, or the BFA hasn’t been signed through standard legal processes.
3. Super Split: The funds are then split according to the terms of the agreement, which may involve one party receiving a percentage of the other’s super balance or having a portion of their super transferred to their partner’s super account.

A prenup (or Binding Financial Agreement) is a practical tool for anyone in Australia seeking financial protection and clarity in their relationship. Whether you’re getting married, living together, or separating, a BFA can define how assets and debts will be divided. 

With legal advice, full financial disclosure, and fairness, a prenup ensures peace of mind and protects both parties’ interests. It’s not just for the wealthy—any couple can benefit from the security and clarity it offers.