A financial split, formally known as a ‘property settlement’ involves the division of all assets, debts, superannuation and resources after separation. For the majority of couples, they will reach an agreement between themselves without ever stepping foot in a courtroom.
To split superannuation, save money in stamp duty and capital gains tax and to simply have peace of mind about your future, it’s worthwhile considering making that agreement official – legally binding and enforceable so there can be no future comeback.
Under our legislation, the Family Law Act 1975, there are only two ways your can make your property settlement agreement official (legal and binding):
- Option A: Financial Consent Order
- Option B: Binding Financial Agreement
So, what are the differences between a Consent Order vs Binding Financial Agreement?
Consent Orders
- Agreement paperwork must be submitted to the court
- Court approval required – the court’s decision-maker will only approve your consent orders application if satisfied that your proposed financial split (property settlement) is just and equitable. This means your agreement must fall within the range of what the law says is an appropriate outcome
- Legal advice optional – you and your partner don’t have to get independent legal advice
- Legally recognised, binding, and enforceable agreement
- Stamp duty concessions and capital gains tax rollover relief available
- Superannuation can be split
- Can deal with spouse and de facto maintenance (what the Americans term ‘alimony’) but doesn’t prevent against a potential future claim
Binding Financial Agreement
- Private agreement between you, your partner, and your two separate lawyers – your agreement paperwork is not submitted to the court
- Court approval of your agreement is not required
- You and your partner must each have independent legal advice
- Legally recognised, binding, and enforceable agreement
- Stamp duty concessions and capital gains tax rollover relief available
- Superannuation can be split
- Can deal with spouse and de facto maintenance (what the Americans term ‘alimony’) and on a final basis
Which one should we choose?
There are reasons why it may be preferable to opt for a Binding Financial Agreement over a Consent Order, or vice versa.
Here are some of the reasons why separating couples opt for a Binding Financial Agreement:
- They have a lot of wealth or a complex pie, which might include corporate entities, businesses, overseas assets, and various trusts
- They have a maintenance (alimony) component to their agreement
- They agree to have prolonged financial ties, for example, holding onto joint assets or self managed super funds for a few years, or their agreement is overly complex and potentially outside of the experience of a court decision-maker
- Their financial separation agreement is so unfair there’s no way a court would approve it
- Their lawyers have flagged that for whatever reason their agreement is at risk of a rejection by the court
- Their lawyers have said that a Binding Financial Agreement will be faster and easier for them
Here are some of the reasons why other separating couples opt for a Financial Consent Order:
- They have a simple pie, for example, a house or two, cars, super, bits and pieces but nothing complex
- They don’t want two separate lawyers
- They understand that Financial Consent Orders will be faster and cheaper than a Binding Financial Agreement, with two separate lawyers
- They want their agreement to be determined as “fair” (just and equitable) in the eyes of the law
- They understand that a Financial Consent Order is more difficult to challenge in the future, versus a Binding Financial Agreement
Where to from here?
Hopefully you now have a sense of the differences between a Financial Consent Order and a Binding Financial Agreement, and perhaps which option would best suit your own circumstances. Of course consider getting advice from an experienced family lawyer about which option is best for you.