Binding Financial Agreements - Defacto Partners

October 8, 2019

Not everyone chooses to get married – particularly with a divorce rate of 2 for every 1000 people in Australia. And breaking up is hard to do whether you’re married or in a de facto relationship.

But at a practical level, it can be particularly tricky for a de facto couple if you’re unclear about what’s involved in dividing assets – and much of the information online is technical and complicated.

In this article, we aim to give you a clearer understanding of legal entitlements for de facto couples in NSW.


First things first – how do I know if my relationship is classified as de facto?

Under the Family Law Act 1975, you’re in a de facto relationship if you:

    • Are not legally married to them
    • Are not related to them, and
    • Are living as a couple in a relationship on a genuine domestic basis.

This is determined by various factors, including:

    • How long you’ve been in the relationship
    • Whether you live together
    • Whether you have a sexual relationship
    • How financially dependent or interdependent you are
    • Whether you own, use, or have bought property
    • Mutual commitment to sharing your lives
    • The care and support of children
    • The public nature of your relationship.

De facto relationships may exist between people of the opposite sex and same sex couples. And under the law, a de facto relationship can exist even if one of the couple is married to someone else.

If you’re in a de facto relationship, when it comes to making property settlements the following conditions apply under the Family Law Act 1975:

    • Your de facto relationship lasted for at least two years;
    • You have a child with your de facto partner;
    • You’ve made a substantial contribution to the property or finances of your partner;
    • The relationship was registered under a State or Territory law
    • You lived for at least one-third of your relationship in NSW or another state where the laws apply (currently all Australian states and territories except WA.)

Why is a binding financial agreement handy in a de facto relationship?

No one goes into a relationship thinking it won’t work – but it’s important to be practical.

In an amicable break-up, it’s possible to reach a balanced solution when it comes to property settlements. Where the relationship ends badly and there’s a dispute, a financial agreement makes the division of assets clearer. This is important in any case, but in NSW and particularly Sydney – one of the world’s most expensive cities – the stakes are higher.

How the law changed to accommodate de facto partners

The entitlements of de facto partners changed under the Family Law Act 1975 with the Family Law Amendment (De Facto Financial Matters and Other Measures) Act 2008. Under this change, effective 1 March 2009, the Act can determine the property and ongoing obligations of de facto partners whose relationship ended on or after that date.
The changes meant that essentially de facto partners were given the same rights as married couples if their relationship broke down, and they could utilise legal documents – such as a binding financial agreement – to determine how assets were divided, including the splitting of superannuation.

Is a binding financial agreement essential?

No. But it could be the smart thing to do to protect your assets. A financial agreement covers how your property and financial resources will be divided, maintenance for you or your de facto partner, and anything else that is associated with either aspect.

You can enter into an agreement before and during a de facto relationship, and when the relationship ends.

Parent Article: Binding Financial Agreements

Why should a financial agreement be kept up to date?

One thing to consider is that over time, things change. One partner gets a promotion or loses a job, the other stays home to care for children or a parent, takes a career break, or winds back working hours. Or there are external factors, like falling property prices.

Since this impacts how financially dependent you are on each other, it’s important to consider whether a financial agreement is appropriate for your situation.

While guiding you through this process, your CM Lawyer will explain to you the advantages and disadvantages of entering into your financial agreement to protect your interests.

If you do decide to proceed, it’s important to keep your agreement current so it accurately reflects your position.

It’s important to know that a financial agreement does not mean your de facto relationship will fail. Financial agreements are there to protect you only if your relationship breaks down. If you decide to marry, then your current agreement (as a de facto) stops being binding, and you can then consider whether you need such an agreement. Contact us at CM Lawyers and we will walk you through every step of the way.

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