The general rule when applying for visas onshore is that you need to hold a valid visa to be able to apply for a visa of a different class. One of the exceptions is applications for a partner visas. However, if you don’t hold a substantive visa when you apply for your partner visa, you will still need to comply with the schedule 3. That basically means that you have a 28 day period of grace after the expiry of your last substantive visa. The good news is that schedule 3 can be waived if there are compelling circumstances.
What makes circumstances compelling is very subjective and depends on the facts of each case.
One might think that it would be a compelling circumstance if there was an Australian citizen child of the relationship. This is not necessarily the case as the applicants in the recent full Federal Court case of Singh v Minister for Home Affairs  FCAFC 7 found out. The AAT found that they had the child to “bolster” their chances of success in their application. The Federal Court agreed (it’s actually a bit more complicated than that), but the following submission from the Minister was accepted:
 It was submitted that the question of the motivation for having the child was not determinative of the Tribunal’s conclusion that “compelling reasons” did not exist. It was that the parties chose to have a child (or, more accurately, successfully attempted to have a child) knowing that the appellant may have to go off-shore to make a further application that rendered the circumstances devoid of the required characteristic. The effect of the Tribunal’s reasoning is that the circumstance that there was a child of the relationship was not compelling when the parties sought to have that child knowing that the appellant was not a resident and knowledgeable of the requirement that he may have to go off-shore in order to apply for a permanent visa.
If you have run foul of schedule 3 I can help you with some professional advice on what’s relevant (or not).
Creative commons acknowledgment for the photograph.