You may have heard about contracting out agreements – commonly referred to as pre-nups – and wondered whether one is right for you. These agreements can play a key role in protecting your assets and avoiding disputes down the track.
What is a contracting out agreement?
Section 21 of the Property (Relationships) Act 1976 (“the Act”) provides as follows:
Spouses, civil union partners, or de facto partners, or any two persons in contemplation of entering into a marriage, civil union, or de facto relationship, may, for the purpose of contracting out of the provisions of this Act, make any agreement they think fit with respect to the status, ownership, and division of their property (including future property).¹
Such an agreement allows you to opt out of the default rules under the Act, which generally assume a 50/50 split of relationship property after three years of being together – or sooner in some circumstances.
To be legally binding:
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The agreement must be in writing and signed by both parties.
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Each party must have independent legal advice before signing.
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The signature of each party must be witnessed by a lawyer, who must certify that they have explained the effects and implications of the agreement to that party.
Common reasons to have a contracting out agreement
You might want a contracting out agreement if:
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One of you owns a home or other major assets that you brought into the relationship and want to keep separate.
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You are entering into a second or later-in-life relationship and want to protect your children’s inheritance or prior assets.
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One person expects to receive a future inheritance.
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You are starting, or already have, a business and want to ring-fence your business interests.
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You both agree on a division of property that differs from what is prescribed in the Act and want to formalise that agreement legally.
What happens if you do not have one?
If you are in a qualifying relationship which ends either due to separation or the death of one party, and do not have a contracting out agreement:
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The family home is considered relationship property, even if it was purchased by one partner before the relationship began.
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All property acquired during the relationship is presumed to be shared equally.
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Assets you intended to keep separate may be subject to division.
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Disputes can arise, leading to stress, legal costs, and potentially litigation.
When should you get one?
Ideally, a contracting out agreement should be signed before you have lived together for three years. However, it is never too late – they can be entered into at any point during the relationship. The earlier you do it, the cleaner and easier the process is likely to be.
While it may feel unromantic to bring up the topic, the result is clarity and certainty for both parties moving forward. It can even strengthen communication and planning as a couple. A contracting out agreement is not just for the wealthy or overly cautious – it is a practical step to help avoid emotional and financial stress later on.
Think of it like insurance: you hope you won’t need it, but if you do, you’ll be glad it’s in place.
If you’re unsure whether it’s right for your situation, speak to a lawyer who specialises in relationship property law. They can help you understand your position and whether a contracting out agreement would benefit you.
