Pre-Nuptial Agreements under the Family Law Act 1975 (Cth)

There are three main types of financial agreement under the Family Law Act ("FLA") - before marriage, during marriage and after separation. A pre-nuptial agreement is the common phrase used for an agreement before marriage. People who are contemplating entering into a marriage can make a financial agreement with respect to the following matters:

  • How in the event of marriage breakdown, all or any of the property or financial resources of either or both of the parties is to be dealt with
  • The maintenance of either party during marriage and/or after the dissolution of marriage
  • any other incidental or ancillary matters to those above

provided that the agreement is expressed to be made under section 90B and no other agreement is in force between the parties at the time of making the agreement.

What are Incidental or Ancillary Matters?

The FLA provides no definition or examples of incidental or ancillary matters. Applying constitutional interpretation, an ancillary or incidental matter is typically one which has a sufficient connection with the subject of property division or spousal maintenance during marriage and/or after dissolution. For example, the payment of one spouses' credit card bills or the contribution to a child or stepchild's education would be a matter incidental to spousal maintenance during marriage. However it is debatable whether a list detailing each spouses' sexual duties would entail a matter incidental or ancillary to spousal maintenance during the marriage.

Financial Agreements During Marriage (Section 90C) and After Dissolution of Marriage (Section 90D)

Provisions under the FLA for financial agreements during marriage and after dissolution of marriage are similar in nature to the pre-nuptial provisions discussed above.

Child and Spousal Maintenance Provisions in Financial Agreements (Section 90E)

Provisions in the financial agreement dealing with the maintenance of a spouse, child or children to the agreement is void unless the provision specifies:

  • The name of the party (spouse, child etc) for whose maintenance provision is made
  • The monetary sum or value of property attributable to the maintenance of the party

However, any agreement on child maintenance can be overrided by an assessment made by the Child Support Agency.

Court Powers to Alter Spousal Maintenance (Section 90F)

No maintenance provision in a financial agreement excludes or limits the power of a court to make a maintenance order if the court is satisfied that when the agreement came into effect, the circumstances were such that, taking into account the terms and effect of the agreement, the party would have been unable to support himself or herself without an income tested pension, allowance or benefit.

Checklist for a Binding Financial Agreement (Section 90G)

1. Agreement signed by both parties

2. The agreement contains a statement that each party obtained independent advice from a legal practitioner as to the following matters:

  • the effect of the agreement on the rights of that party
  • the advantages and disadvantages, at the time the solicitor provided the advice, to the party of making the agreement
  • whether or not it was prudent for that party to make the agreement
  • whether the provisions of the agreement are just and equitable

3. An annexure (attachment) to the agreement contains a certificate signed by the legal practitioner stating that such advice on the above matters was provided

4. the agreement has not been terminated or set aside by a court of law

5. Upon signing, the original agreement is given to one of the parties and a copy is given to the other.

6. A separation declaration (e.g. when parties are splitting superannuation in their financial agreement)

If these requirements are fulfilled, the court may make any such necessary orders for the enforcement of the financial agreement.

The Death of a Party to a Financial Agreement (Section 90H)

Most Australians perceive pre-nuptial agreements in terms of property division instruments in the event of a divorce. However under section 90H, a financial agreement survives the death of a party to the agreement and becomes binding upon the legal personal representative of that party. Thus, pre-nuptial agreements can protect your personal assets for the benefit of your children and other heirs upon your death.

Termination of Financial Agreement (Section 90J)

How can a financial agreement be terminated?

  • Including a termination provision in another financial agreement (ie in the process of drafting a second financial agreement)
  • Making an individual written termination agreement (circumstances where you do not want to make another financial agreement)

How is a termination agreement binding?

Similar requirements for a binding financial agreement apply to the drafting of a termination agreement.

How can the court intervene despite a valid termination agreement?

Upon application by a party or any other interested person, the court may make such order(s) as it considers just and equitable for the purpose of preserving or adjusting the rights of persons who were parties to that financial agreement and any other interested persons. Such an order would include for example an order for the transfer of property.

Court Power to Set Aside a Financial or Termination Agreement (Section 90K)

A court can set aside both financial and termination agreements if satisfied that:

  • the agreement was obtained by fraud (eg non-disclosure of a material matter); or
  • the agreement is void, voidable or unenforceable (eg the binding requirements were not fulfilled); or
  • circumstances have arisen since the agreement was made that make it impracticable for the agreement or part of the agreement to be carried out; or
  • since the agreement was made, a material change in circumstances that relate to the care, welfare and development of a child of the marriage has occurred. As a result of the change, the child, one who has caring responsibility for the child (parent, person with residence order or specific issues order in relation to care, welfare and development) or a party to the agreement will suffer hardship if the court does not set the agreement aside; or
  • a party to the agreement engaged in unconscionable conduct in the process of developing the financial agreement (eg signing the agreement on wedding day)

Validity, Enforceability and Effect of Financial and Termination Agreements (Section 90KA)

The court determines the validity, enforceability and effect of financial and termination agreements according to the principles of contract law and equity. The court has the same powers as the High Court, including the power:

  • to make an order for interest on an amount payable under the agreement
  • to award damages, order bankruptcy or termination of the financial agreement
  • to order that the all or part of the financial or termination agreement be enforced as if it were an order of the court (for example, if one party is required to pay x amount at dissolution and does not do so, the court simply makes an order to that effect)

Financial and other Agreements not Liable to Duty (Section 90L)

A financial agreement, termination agreement, or a deed or other instrument executed by a person for the purposes of, or according to the financial agreement provisions, is not subject to any state or federal duties and charges.