CHILD SUPPORT AGREEMENTS
What is a child support agreement?
A child support agreement (“CS agreement”) is an agreement which covers one or more aspects of the financial support one or both parents will provide for a child, for whom a child support assessment could be made. A CS agreement can be made between either the two parents of a child or one or both parents and a non-parent who cares for the child. It can be made to change or replace a child support assessment or to supplement an assessment. A CS agreement can be either a binding or limited agreement.
What are the differences between binding and limited child support agreements?
The main differences between binding and limited CS agreements are:
- The requirements which must be met when making the agreements; and
- The ways in which they can be terminated.
A binding CS agreement (“binding agreement”) can only be made if all parties to the agreement have had independent legal advice from separate lawyers prior to entering into the agreement. However, parties to a limited CS agreement (“limited agreement”) are not required to obtain legal advice before entering into the agreement.
On the other hand, a limited agreement can only be accepted by the Child Support Registrar (“the Registrar”) if there is a child support assessment (“assessment”) in place at the time the limited agreement is lodged with the Department of Human Services – Child Support (“the CSA”). Whereas, a binding agreement can be made and accepted by the Registrar without either party needing to apply for an assessment. This is because parties to a limited agreement cannot agree that the paying parent will pay an amount of child support which is less than he or she would be required to pay under an assessment, but a binding agreement can.
A binding agreement can only be terminated:
- If the parties enter into a termination agreement or a further binding agreement, which includes a clause terminating the first agreement;
- By a court order setting the agreement aside; or
- If the parent entitled to receive child support under the agreement, ceases to be an eligible carer for the child.
A limited agreement can be terminated in each of the above circumstances, but can also be terminated by any party to the agreement:
- After the expiry of 3 years; or
- If the notional assessment of child support changes by more than 15% in circumstances not covered by the agreement.
What are the benefits of making a child support agreement?
CS agreements give parties flexibility in relation to their child support arrangements. They allow parties to agree on the amount of child support to be paid rather than being bound by the amount calculated by the CSA. They also allow parties to agree how child support will be paid – weekly, fortnightly, in a lump sum or by payments to third parties (for example, by payment of school fees or the other party’s share of a mortgage). Parties who instead go through the CSA are required to pay child support in cash on a monthly basis and there are limited circumstances in which payments to third parties can be considered.
CS agreements can provide for the paying party to pay for certain expenses, over and above the amount he or she pays in monthly child support under an assessment. For example, all or part of the child’s school fees, the cost of school uniforms or text books, premiums for private health insurance, out of pocket medical, dental or orthodontal expenses, the cost of extra-curricular activities, tuition, training or lessons and so on. Binding agreements can even be used to reduce a paying parent’s child support liability to $0.00 as part of the wider financial arrangements between the parties following separation.
Are there any disadvantages of making a child support agreement?
The main disadvantage of making a CS agreement is that an agreement can only be changed or terminated in limited circumstances. This is less of a problem with a limited agreement, because the child support paid under a limited agreement must be at least equal to the amount payable under a notional child support assessment and a limited agreement can be terminated after 3 years. However, a binding agreement remains in force until a child turns 18 unless both parties agree to terminate it or one party brings a successful court application to have the agreement set aside. Therefore, it is vital that a binding agreement is carefully drafted and allows for changes to the amounts payable under the agreement where there are changes in the parties’ financial circumstances. For example, by including clauses providing for the child support amount to reduce if the paying parent loses his or her job, or to increase when a primary-school age child commences high school, where the parties have agreed the child will attend a private school.
When can a child support agreement be set aside by a court?
Section 136 of the Child Support Assessment Act sets out the grounds for setting aside a CS agreement. Most of the grounds relate to the behaviour of the parties at the time the agreement was made. The intention being to ensure that a party does not enter into an agreement which has been achieved through fraud, duress or unconscionable conduct by the other party. A limited agreement can also be set aside if, since the agreement was made, there has been a significant change in circumstances of one of the parties or the child and it would be unjust not to set aside the agreement. Or, if the limited agreement sets an annual rate of child support that is not proper or adequate in all the circumstances of the case. A binding agreement can be set aside if, since the agreement was made, exceptional circumstances have arisen in relation to one of the parties or the child, which will result in the child or the applicant suffering hardship if the agreement is not set aside.
The law in relation to child support is complex and child support agreements need to be carefully drafted. You should engage an experienced Accredited Specialist in Family Law to advise you before deciding whether to make such an agreement and to ensure that if you go ahead, the agreement allows for possible changes in circumstances, so that you are not disadvantaged.
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