Binding Financial Agreements in Australia: Requirements, Risks and How They Fail

A financial agreement – what many people call a prenup or binding financial agreement – is a private contract that replaces the court’s power to divide your property. That makes it a powerful document, and the law is correspondingly demanding about how it is made.

The Short Answer

Clients regularly ask what makes a financial agreement binding, and it is worth setting out plainly, because a financial agreement which does not comply with the Family Law Act is not worth the paper it is written on. If it fails, you are back where you would have been if you had never made it – having paid for the agreement, and often having relied on it for years.

The requirements are technical and the courts apply them strictly. Both of you must have your own lawyer, and each lawyer must give genuine advice about what you are giving up. That second part is where most agreements fail. A signed certificate saying advice was given is not enough. The advice has to be real: it has to identify what you would be entitled to under the law if there were no agreement, so that you can compare that with what the agreement gives you. A lawyer who has not worked out your actual entitlements cannot advise you on what you are surrendering, and an agreement built on that kind of advice is vulnerable to challenge.

Even a technically perfect agreement can be set aside. The grounds include non-disclosure, unconscionable conduct, undue influence, and a material change in the circumstances of a child. The High Court set aside two agreements in 2017 in circumstances where the wife had received independent legal advice, had been told the agreement was the worst her solicitor had seen, and signed it anyway. The advice did not save the agreement. In some circumstances it can help demonstrate the very pressure that undoes it.

The practical conclusion is uncomfortable but honest. The commercial attraction of these agreements is certainty, and certainty is the one thing they cannot guarantee. They are worth making where the asset position genuinely justifies the cost – a significant disparity in what each of you brings in, a business, a family trust, a second relationship with children from the first, an expected inheritance. They are worth making properly whenever they are made at all. An agreement that was cheap to prepare is very often the agreement that fails.

If certainty is what you are after and you have already separated, consent orders may serve you better. We explain the difference below.

The Law in Detail

The Statutory Basis

Financial agreements between married parties are governed by Part VIIIA of the Family Law Act 1975 (Cth), and between de facto parties by Part VIIIAB. In Western Australia, de facto financial agreements are governed by the Family Court Act 1997 (WA), which operates separately from the Commonwealth scheme.

Agreements may be made before marriage under s 90B, during marriage under s 90C, or after divorce under s 90D. The de facto equivalents are ss 90UB, 90UC and 90UD. The colloquial terms prenuptial and postnuptial agreement have no statutory meaning; the operative distinction is the timing provision under which the agreement is made, and it matters, because an agreement made under the wrong provision is not saved by the parties’ intentions.

Requirements for a Binding Agreement

Sections 90G and 90UJ set out the conditions which must be satisfied before an agreement is binding. The requirements are technical and are strictly construed:

1. The agreement must be in writing and signed by both parties.
2. Before signing, each party must have been provided with independent legal advice from an Australian legal practitioner as to the effect of the agreement on that party’s rights, and the advantages and disadvantages, at the time the advice was provided, of making the agreement.
3. Each practitioner must provide a signed statement confirming that the advice was given.
4. A copy of each statement must be given to the other party or to that party’s practitioner.
5. The agreement must not have been terminated or set aside by a court.

Section 90G(1A) permits a court to declare an agreement binding notwithstanding a failure to comply with paragraphs (b), (c) or (ca), where it would be unjust and inequitable if the agreement were not binding. That provision is a remedial safeguard for the party seeking to uphold the agreement. It is not a substitute for compliance, and no competent practitioner drafts in reliance on it.

What ‘Independent Legal Advice’ Actually Requires

The requirement for advice is substantive, not merely formal. In Abrum & Abrum [2013] FamCA 897, delivered on 19 November 2013, Aldridge J held:

‘In order to give advice about the effect of an agreement on the rights of a party, that is their rights under the Act in relation to property, a legal practitioner must establish what those rights are at the time the advice is provided… If their rights are not known then it is impossible to advise as to the effect of the agreement on them’ (at [39]).

‘It is unhelpful to advise a person that a financial agreement might adversely affect his or her rights if those rights are not identified. A party must know more than some unknown or undefined right is being given up. He or she must have some idea, at least in general, of his or her present entitlements or rights… with which he or she may compare the provisions of the proposed financial agreement’ (at [40]).

His Honour went on to confirm that the advice must be ‘real and meaningful’, directed to the parties’ actual circumstances and present rights (at [42]), and that proper identification of those rights requires consideration of the property of the parties, their contributions, and the statutory considerations bearing on a property settlement (at [43]). A failure to undertake that exercise means the advice required by the Act has not been given (at [44]–[53]).

These principles are current, and have been confirmed at appellate level. They were approved in Wallace & Stelzer [2013] FamCAFC 199 and affirmed by the Appellate Division of the Federal Circuit and Family Court in Dragomirov & Dragomirov [2024] FedCFamC1A 187.

A point of detail that matters now.  Aldridge J framed the exercise by reference to the factors in s 79(4) and s 75(2), and their de facto equivalents in s 90SM(4) and s 90SF(3). Those provisions were restructured by the Family Law Amendment Act 2024 with effect from 10 June 2025. The considerations relating to contributions are now in s 79(4), including the new paragraph (ca) on the effect of family violence, and what were the s 75(2) factors are now consolidated in s 79(5) – which adds wastage, liabilities and housing needs as express considerations. The principle in Abrum is unaffected. What has changed is the content of the exercise: advice given today must identify the party’s rights under the amended provisions. Advice framed around s 75(2) as though it was still operative is, on the reasoning in Abrum, exposed.

Grounds For Setting an Agreement Aside

Section 90K sets out the grounds on which a court may set aside a financial agreement; s 90UM is the de facto equivalent. The principal grounds are:

1. Fraud, including material non-disclosure of a matter.
2. The agreement being void, voidable or unenforceable.
3. Circumstances arising since the making of the agreement which make it impracticable for the agreement, or part of it, to be carried out.
4. A material change in circumstances relating to the care, welfare and development of a child of the relationship, where hardship would result if the court did not set the agreement aside.
5. Conduct by a party in entering into the agreement which was, in all the circumstances, unconscionable.

Financial Agreements After Thorne v Kennedy

The governing authority is Thorne v Kennedy [2017] HCA 49. The High Court set aside two agreements on the grounds of undue influence and unconscionable conduct. The circumstances were significant: the agreement was presented days before the wedding, the wife had no assets and no independent means, she was in Australia on a visa, her own solicitor advised her that the agreement was the worst she had seen and that it should not be signed, and she signed it nonetheless.

The decision established that the presence of independent legal advice does not ‘immunise’ an agreement. Where advice is given and disregarded in circumstances of pressure and inequality of bargaining position, the fact of the advice may in some circumstances evidence the very vulnerability relied upon.

What careful practitioners changed as a result

1. Timing. An agreement executed shortly before a wedding invites scrutiny. Where a wedding date is fixed, the agreement should be settled well in advance of it – weeks, not days.
2. Disclosure. Full and documented disclosure of assets, liabilities and income by both parties, exchanged and recorded, so that non-disclosure cannot later be asserted.
3. Independence of advice. Each party’s practitioner should be genuinely independent, and the advice should be recorded in terms that demonstrate the party understood it — including what they would have been entitled to without the agreement.
4. Substantive fairness. An agreement which leaves one party with nothing is more vulnerable than one which makes reasonable provision, irrespective of formal compliance.
5. Contemporaneous record. Attendance notes recording the negotiation, the advice and the party’s instructions are the evidence on which any later challenge will turn. They are made at the time or not at all.

Terminating or Replacing an Agreement

Circumstances change, and parties sometimes want out of an agreement they have made. Under s 90J, a financial agreement may be terminated in only two ways: by including a termination provision in a subsequent financial agreement, or by making a written termination agreement.

A termination agreement is itself subject to substantially the same formal requirements as the agreement it terminates – signature by all parties, independent legal advice to each spouse party, signed practitioners’ statements, exchange of those statements, and no order setting it aside. There is a corresponding safeguard in s 90J(2A) where those requirements are not met and it would be unjust and inequitable for the termination agreement not to be binding.

The practical point is that an agreement cannot be undone informally, cannot be torn up by consent in the kitchen, and cannot be varied by a subsequent exchange of emails. Doing it properly costs money a second time, which is a further reason to get the first agreement right.

Financial Agreements Compared with Consent Orders

Both mechanisms produce a binding outcome, but they operate quite differently, and the choice between them is a matter of advice on the particular facts rather than preference.

	Financial agreement	Consent orders
How it operates	By contract, between the parties.	By order of the court.
Judicial scrutiny	None at the time of execution.	The court must be satisfied under s 79 that the orders are just and equitable before making them.
Available before separation	Yes – before or during the relationship.	No. Consent orders require an existing matter to resolve.
Scope	Can deal with future property and can exclude spousal maintenance.	Deals with the property and maintenance in issue between the parties.
How it is challenged	Set aside under s 90K, on comparatively broad grounds.	Set aside under s 79A, on narrow grounds.
Practical finality	Lower. The grounds of attack are wider and the formal requirements exacting.	Higher. Judicial scrutiny at the outset and a narrow route to challenge.
Cost	Two sets of practitioners, disclosure, and drafting. Rarely inexpensive if done properly.	Similar, where the terms are agreed.

An agreement is capable of covering matters a consent order cannot. A consent order carries greater finality. The two are not interchangeable, and where parties have already separated and reached agreement, consent orders will sometimes be the better instrument. Where the objective is to protect a position before a relationship or a marriage begins, a financial agreement is the only mechanism available.

When an Agreement is Appropriate

Financial agreements are most valuable where there is a substantial disparity in the assets each party brings to the relationship, where there are business interests or a family trust which third parties expect to be protected, where a party is entering a second relationship with children from a prior relationship, or where an inheritance is anticipated.

They are least valuable where the asset position is modest and evenly held, where the cost of preparing a compliant agreement is disproportionate to the assets in issue, or where one party will not obtain genuinely independent advice. In the last of those cases we will generally advise against proceeding at all, because an agreement that will not hold is worse than no agreement: it produces reliance without protection.

Our view, stated plainly. The commercial attraction of a financial agreement is certainty. The better view is that a financial agreement is worth making where the asset position genuinely justifies it, and worth making properly when it is made at all.

How we prepare an agreement

Stage	What happens	Typical timeframe
Initial advice	We take instructions, identify what you are seeking to protect, and advise on whether an agreement is the right instrument or whether something else serves you better.	One to two weeks
Disclosure	Both parties exchange documented disclosure of assets, liabilities, income and superannuation. This is recorded, because its absence is a ground for setting the agreement aside.	Two to four weeks
Entitlement analysis	We identify what the party we act for would be entitled to under the Act if there were no agreement. This is the step Abrum requires and the step most commonly skipped.	One to two weeks
Drafting and negotiation	A draft is prepared and exchanged. Expect at least two rounds. The other party’s practitioner will properly want changes.	Three to six weeks
Advice and execution	Each party receives formal written advice, the practitioners’ statements are signed and exchanged, and the agreement is executed.	One to two weeks

Allow eight to twelve weeks, and more before a wedding. Thorne v Kennedy makes timing a substantive risk rather than an inconvenience. If there is a wedding date, work back from it and aim to execute well clear of it. An agreement signed in the last fortnight before a wedding carries a materially higher risk of being set aside, however carefully it is drafted.

What drives the cost

1. The complexity of the asset structure – a company, a trust or a self-managed fund adds work at every stage.
2. Whether valuations are required to make the entitlement analysis meaningful.
3. How many rounds of negotiation the other side’s practitioner requires.
4. Whether disclosure is provided promptly or has to be pursued.

We provide written costs disclosure before we act, and we will tell you at the outset if we think the likely legal cost is disproportionate to what you are trying to achieve. 

Talk to a Binding Financial Lawyer at Testart today.

Common Questions

Are financial agreements actually enforceable in Australia?

Yes, when they are made properly. A financial agreement that satisfies the requirements of s 90G (or, for de facto, s90UJ) is binding and displaces the court’s ordinary power to divide property. The qualification matters: the requirements are strictly applied, and an agreement that does not meet them is essentially unenforceable.

Can we use the same lawyer to save money?

No. Independent legal advice from a separate practitioner for each party is a statutory requirement, not a formality. An agreement where both parties used the same lawyer will not be binding.

How long before the wedding should we sign?

As long as practicable, and certainly not in the final days. In Thorne v Kennedy the proximity of the wedding was central to the finding of undue influence. Allow eight to twelve weeks for preparation and aim to execute well clear of the date.

Can a financial agreement be changed later?

It cannot be varied informally. Under s 90J it can be terminated either by a provision in a new financial agreement or by a written termination agreement, and the termination agreement must itself satisfy substantially the same requirements, including independent legal advice for each party.

What if our circumstances change completely?

That may be a ground to set the agreement aside, but only in defined circumstances – where events since the agreement make it impracticable to carry out, or where there is a material change relating to the care of a child and hardship would result. General unfairness with hindsight is not enough.

Can the agreement deal with the children?

No. Parenting arrangements cannot be predetermined by a financial agreement, and a court’s power in relation to children is not displaced by contract. Child support can only be dealt with through a separate child support agreement under the child support legislation.

Does an agreement have to be fair?

There is no statutory fairness requirement, and an agreement may lawfully be one-sided. But substantive unfairness is practically relevant: an agreement that leaves one party with nothing attracts scrutiny and is more vulnerable to challenge on unconscionability or undue influence than one making reasonable provision.

Will an agreement definitely hold up?

No competent lawyer can promise that, and you should be cautious of one who does. What can be done is to prepare the agreement so that every ground of attack has been anticipated: documented disclosure, genuine and recorded advice, sensible timing, and contemporaneous file notes.

We have already separated. Is an agreement still the right tool?

Perhaps. Where you have separated and reached agreement, consent orders might give better finality at lower cost, because the court’s approval at the outset narrows the grounds on which the outcome can later be challenged. We can advise you of this.