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Whether you have recently separated or have been for some time and know you need to get your financial separation moving along, you will want to become familiar with the types of financial separation agreements that exist in Australia.
This page is dedicated to unpacking two types of financial separation agreements, if your goal is to get to an agreement about how to separate your finances and assets, without the intervention of the Court.
If you need information about the steps involved in the property settlement process, visit this page here.
A Binding Financial Agreement After Separation
A Binding Financial Agreement (BFA) is designed to be used when an agreement is reached between you and your former partner about financial and property matters. Both you and your former partner or spouse will require the involvement of family lawyers to undertake this type of financial agreement.
A financial agreement tends to be used when there are significant assets or complex financial structures. For example, where people have interests in businesses and trusts. What makes it a Binding Financial Agreement is if both parties sign it, agreeing to the terms within the document.
A Binding Financial Agreement may also be used where family law requirements (e.g. to ensure that the division of finances is ‘just and equitable’), is not the primary objective of the financial agreement. Given that a Binding Financial Agreement is often used where there is significant wealth, more time is spent in the financial disclosure process. There is often a lot of back and forth correspondence between your lawyers, requesting additional information to seek clarity.
Importantly, legal advice is a requirement of a BFA, as stated by the Court, as the law about financial agreements is ‘very complex’, and has to meet certain technical requirements. Given this, and the steps involved if someone does not fulfil the terms of the BFA, many family lawyers do not wish to take on the risk that can come with Binding Financial Agreements.
In a BFA, there is no requirement for the terms of the Agreement to be ‘just and equitable’ as it is when there are Court or Consent Orders. This is because sometimes the terms of the agreement may be set out to achieve outcomes that are separate from the issue of whether the division of finances and assets is ‘fair’.
If you decide that a Binding Financial Agreement is the best avenue for your circumstances, it is important to be aware that the process is very involved. Significant time is spent in the financial disclosure part of the process, to ensure that the full financial picture is clear.
Consent Orders
Just like a Binding Financial Agreement, Consent Orders are used when an agreement is reached between you about how you will divide your finances and assets. An application is made for Consent Orders, and the Court will sign off on it if the terms of your agreement meet all of the family law requirements.
While there are a number of requirements, a Registrar of the Court ultimately makes a decision as to whether the agreement is ‘just and equitable’. If they determine it is, then the Consent Order application is approved.
To avoid having your application for Consent Orders rejected, you must ensure that the terms of the agreement will satisfy the Court. Unfortunately, we often have people come to us for support after they have had their application rejected. The best way to avoid this, and the lengthy delay that comes with this outcome, is to seek family law advice early. Even if you want to DIY as much of this process as you can.
It is more expensive to fix what you have submitted than if you’d sought legal advice and assistance at the start. If your application is rejected, to resubmit, there are more steps involved, including submitting affidavits, which would not otherwise be required. So, getting it right the first time, with the advice and insight of a family lawyer, is always the most time and cost-effective course of action.
If you’re reading this and you’ve both come to an agreement, and you’re considering applying for Consent Orders yourselves, run it past a family lawyer first to learn if it’s likely your application will be accepted.
The Court will not change the wording of your agreement for you, or give you advice about what you need to do to make it right, you will only be directed about what you need to do next to resubmit the application.
What If One Person Doesn’t Follow Through With The Consent Orders or Financial Agreement?
If someone does not follow the terms of their agreement, whatever type it is, there are steps that can be taken to resolve it.
Identifying The Difference Between Binding Financial Agreement And Consent Orders
If you have a BFA, and your ex has not complied with the terms, you will need to engage a family lawyer to initiate proceedings in the Court and begin that process. Because the Court has not been involved in ensuring your BFA is ‘just and equitable’, as it does with Consent Orders, this requires the Court to review all of the terms of the Agreement, rather than the specific issue at hand.
Conversely, if you have Consent Orders, a Contravention Application can be filed with the Court. You do not have to start Court proceedings. The Court then deals with the specific breach, in isolation. This can be done fairly quickly and generally speaking, is easier to manage and resolve sooner.
Consent Orders are far less likely to be overturned as a Registrar has previously approved the agreement because it passed the ‘just and equitable’ test.
In short, Binding Financial Agreements typically require more work, reviewing financials and back and forth between lawyers, making them more expensive than Consent Orders. They are also more expensive because there is a greater risk of them being overturned.
If you have children, and wish to have your Parenting Arrangements formalised as well, you can combine both your parenting and property applications in the one application by lodging an Application for Consent Orders.
Importantly, both of these financial separation agreements have value. There will be circumstances where a Binding Financial Agreement will be the most beneficial course of action. While we would love to be able to give you a clear answer on when this would be the case, that is not possible for any family lawyer. It is the sum of all of the pieces of information that would lead us to recommend that type of agreement.
Deciding Between Financial Separation Agreements
Both of these options have pros and cons, so making an informed decision is best achieved from seeking legal advice.
In good news, here in Australia, more than ever, separating couples are able to avoid the need to go to Court. What helps people avoid Court is by getting to an agreement that is considered ‘just and equitable’ according to the conditions set out in the law. This is why, even if you and ex want to do as much of this as possible between you, the fastest and most effective way to do this starts with each of you having an initial appointment with a family lawyer to get a thorough understanding of what is best for your specific circumstances.
Not seeing a family lawyer early enough is what leads to many people having to start the process all over again. This causes more stress, and drags out what could otherwise be a relatively stressless process. Unfortunately, too many people get to an agreement that, when it’s time to get it set in stone, have to go back on what they originally agreed to. This happens because, with Consent Orders, before the Court can accept the agreement reached between the two of you, they need to be satisfied that the agreement is fair in all the circumstances.
It is at this point that often, a family lawyer will advise you of what you should not have agreed to and why, and then you need to revisit your agreement. This is perceived by the other person as ‘going back on your word’. It is where conflicts arise and people end up battling it out in Court.
Seeking legal advice early, even only one or two appointments, can make the world of difference in helping you avoid situations like these.
We see what happens when people don’t foresee the implications of what they agreed to, and we are all about ensuring people are informed about why something they want to agree to could be problematic. Then, ultimately, the decision is up to you.
Have you recently separated or are you considering separation?
Do you have concerns or questions that relate to how to get a divorce in Australia?
We can help you wherever you are based in Sydney. We have two office locations – Penrith & Blacktown – as well as phone and online consultations if preferred. Reach out to our team on 02 47 222 050.
Disclaimer: The content in this article provides general information however it does not substitute legal advice or opinion. Information is best used in conjunction with legal advice from an experienced member of our team.