Separate Property Agreement, Pre-Nup, Contracting Out Agreement – whatever you want to call them – they’re becoming commonplace now, but for good reason.

The Property (Relationships) Act 1976 says that, after a couple have lived together, married, or unmarried, for three years, all relationship property should be divided equally in the event of separation or death. It generally doesn’t matter whether one party hasn’t contributed financially or equally.

A Contracting Out Agreement is called this because we are “contracting out” of what the law says about relationship property and making your own agreement instead. It’s not about trying to deprive the other party of something or making an unfair agreement; it’s about providing certainty and protection for both parties.

Contracting Out Agreements can be as straightforward or as complex as you want them to be in terms of how far the agreement goes and what property it covers. What you need to include will depend on what you are trying to achieve. The following are the most common reasons why these types of agreements are used:

Transferring Property

If property is transferred to another person under a Relationship Property Agreement, then the acquisition date does not change for bright-line tax purposes. This means that property received in a separation and transferred to one party is still deemed to have been owned from the date the property was first purchased by the couple. But it also means that if property is transferred from one party into joint ownership by way of a Relationship Property Agreement, then the same rule applies, and the property is deemed to be owned by the couple from the date it was first acquired.

This is especially helpful now that the bright-line test has been extended from 5 years to 10 years.

Keeping Contributions to a First Home Separate

We commonly find young couples, or first home buyers want to ensure that, in the event of separation, they would each get back what they put into their house purchase. A simple Contracting Out Agreement is how we achieve this.

The agreement sets out what each respective party contributed and defines that as ‘separate property’ to be retained by each party in the event of separation. We then set out how any balance of funds is divided. Typically, this is either divided proportionate to each parties’ initial contribution, or simply split equally.

If this is your intention it is important to ensure you have a Contracting Out Agreement in place. If this isn’t recorded in a Contracting Out Agreement, then there’s nothing stopping one party from going back on what you agreed and demanding half of any equity when things get messy.

Keeping Assets and Liabilities Separate

Some couples want to take things further than just separating out their contributions to the home – they want to keep all or almost all assets and liabilities separate. Contracting Out Agreements can cover as much or as little property as you like. When covering a lot of property, it is particularly important that your agreement is robust and that both parties receive thorough independent advice from a lawyer experienced in relationship property law.

Blended Families and Protecting Children

Contracting Out Agreements are even more commonplace when one or more parties have come from a prior relationship or have children from a prior relationship. These clients might have assets which have come from the previous relationship, or they might be more inclined to ensure their children receive benefit from their assets, instead of, or as well as, the new partner.

In this case, the agreement could ensure each party retains the property they entered the relationship within the event of separation but provide for a different division in the event of their death. Contracting Out Agreements work with your will and alongside any Trust structure and provide a better level of protection and certainty than a will on its own when you are wanting to leave property to both your children and your new partner, or to just your children.


Every situation and relationship is unique., so it’s important that your agreement reflects that. It is not a case of one size fits all. We specialise in asking the right questions and taking the time to find a solution which fits your needs and is tailored to your circumstances.

We understand these can be complex and confusing topics, so reach out to us today if you have questions or need advice. Our experienced family team are willing to listen and provide professional advice tailored to your particular need.

This article is current at the date of publication. It is intended to provide general comments only about legislation. Lewis Lawyers accept no responsibility due to reliance by any person or organisation on the content of this article. Please contact the author of this article if you require specific advice about how this applies to you and your circumstances.