When parents separate, they may or may not agree about what child support should be paid for their children.
In Australia, child support is the governed by the Child Support (Assessment) Act 1989 (Cth). The principal objective of child support is “to ensure that children receive a proper level of financial support from their parents”.
If parents can’t agree about child support arrangements, an application may need to be made to Services Australia (otherwise known as ‘the Child Support Agency’) for an administrative assessment of child support assessment.
The Child Support Agency will an administrative assessment to confirm what one parent must pay to the other on a periodic basis by way of child support. Administrative assessments are based on a complex calculation that takes multiple factors into account, including how many nights the children spend with each parent, the children’s ages, and each parent’s income level.
Importantly, applying to the Child Support Agency is not the only way of working our appropriate child support for your children after separation. In fact, many parents in Australia choose to make their own private arrangements to share in certain costs for their children in a way that works for them, outside of the Child Support Agency.
When parents do agree about private child support arrangements, it is important to formalise such an agreement to ensure the arrangement is binding and enforceable. This provides certainty for both parents and the children involved.
Private child support arrangements can be formalised in either a binding child support agreement or a limited child support agreement. This article focusses on information about binding child support agreements.
A binding child support agreement is a written agreement about child support arrangements that is signed by both parents. For a private child support agreement to be binding, both parties to the agreement must receive independent legal advice about specific matters.
Binding child support agreements are made pursuant to section 80C of the Child Support (Assessment) Act 1989 Cth. Strict compliance with the law required in order for a private child support agreement to be binding.
Parents who enter into a binding child support agreement may agree to an amount payable for child support that is more or less than the amount that would be payable under a child support assessment made by Services Australia.
For example, some parents agree that one parent will pay periodic child support in addition to sharing equally in major costs for their children such as education expenses (including school fees and uniforms), extracurricular activity costs, private health insurance premiums and out of pocket medical costs (just to name a few).
A binding child support agreement can even provide that no periodic child support is payable by either parent.
The primary benefit of entering into a binding child support agreement is that it provides certainty to both parents about the financial arrangements that will be in place for the support of their children until they turn 18 (or, commonly, until they finish high school if that comes later).
Binding child support agreements may be registered with both Services Australia (the Child Support Agency) and the Court.
Negotiating a private child support agreement allows parents to cater to the specific needs of their own children and circumstances. In this sense, private child support agreements allow for arrangements that are genuinely tailored to the needs of the particular families they serve.
Without a binding child support agreement, one party may be assessed to pay child support for their children in accordance with an administrative assessment issued by Services Australia.
Generally speaking, Services Australia provides that the paying parent makes periodic child support payments only. The periodic payments are intended to cover the paying parent’s share of all expenses for the children when they in the receiving parent’s care. This can be limiting for the receiving parent because in reality, children’s costs often far exceed the amount that is administratively assessed as sufficient by Services Australia.
In that regard, entering into a binding child support agreement may be beneficial to the receiving parent if the agreement provides for the paying parent to meet more than just the periodic payments which they would not be obligated to pay under an administrative assessment. This ultimately benefits the children who are the subject of the agreement.
Binding child support agreements often provide that each parent’s obligation to pay periodic and/or non-periodic payments is not contingent upon their respective personal incomes. This means that parents are committed to making certain payments irrespective of whether their incomes increase or decrease. This creates a further level of certainty.
There are no real disadvantages to parties entering into a binding child support agreement.
However, if a party is voluntarily paying a higher level of child support than they could be legally compelled to pay, it may be disadvantageous to enter into a binding child support agreement which commits them to pay something they are already paying voluntarily.
Despite this, entering into an agreement may still be beneficial as it demonstrates a commitment to meeting these additional agreed costs for their children on an ongoing basis.
For a private child support agreement to be binding, the formal requirements set out in section 80C of the Child Support (Assessment) Act 1989 Cth must be complied with.
The formal requirements include that:
These requirements must be strictly complied with in order for a private child support agreement to be binding.
Generally, a binding child support agreement will remain in force until the child in question (or each of them respectively) turns 18 or completes their secondary schooling (or as otherwise stated in the agreement).
A binding child support agreement may only be terminated prior by court order under section 136 of the Child Support (Assessment) Act 1989 Cth, or by the parties entering into a further binding child support agreement.
If parties agree to vary or end a binding child support agreement, they can arrange this by consent either by entering a Termination Agreement or by entering into a new agreement (which also serves to terminate the previous agreement).
A party to a binding child support agreement can also make an application to the Court to have it set aside in certain circumstances.
In order for such an application to be successful, the party applying to the Court must establish one of the matters set out in section 136(2) of the Child Support (Assessment) Act 1989 (Cth) which are as follows:
The test for setting aside a binding child support agreement based on ‘exceptional circumstances’ and ‘hardship’ is difficult to meet. Section 136(2)(d) of the Act requires the applicant to show that the change in circumstances are ‘exceptional circumstances’ that have arisen since the agreement was made, resulting in ‘hardship’. For circumstances to meet the ‘exceptional’ threshold, they must be unusual, out of the ordinary, or special.
Binding child support agreements are intended to be as their name denotes – binding. Applications to set aside such agreements are uncommon.
Binding child support agreements may provide that:
If a binding child support agreement is in place and one parent fails to comply with the agreement, the other party may enforce the agreement by making an application to the Court.
If an administrative assessment is in place, Services Australia can enforce payment on your behalf.
In limited circumstances, yes, a binding child support agreement may be set aside by the Court. As outlined in further detail above, this can happen if one of the matters set out in section 136(2) of the Child Support (Assessment) Act 1989 Cth is established by one party.
However, these situations are rare and binding child support agreements are intended to endure. It is essential that binding child support agreements are properly prepared and comply with the legal requirements.
Generally, a binding child support agreement will remain in force, with respect to each child, until each child turns 18 years of age or completes their secondary schooling (whichever is the later) unless otherwise specified in the agreement itself.
Sections 12 and 80G of the Child Support (Assessment) Act 1989 Cth define a ‘Child Support Terminating Event’ and the circumstances in which a private child support agreement can be brought to an end.
Parties may agree to an arrangement whereby child support is paid by one party to the other as a lump sum, rather than periodic instalments.
This type of arrangement can be formalised in a binding child support agreement.
We often see a lump sum child support payment form part of an overall ‘package’ when a property settlement is being negotiated.
This type of arrangement can suit parents who prefer to receive and control child support payments upfront, or where there are issues of reliability with the paying parent.
In short, you may have some issues. Whether you have a binding child support agreement registered with the Child Support Agency or you are subject to an administrative assessment, you may be stopped from leaving Australia if you have a child support debt.
If such a circumstance arises, you may be required to pay the debt, or enter into a payment arrangement, in order to depart the country.
At Hulse Family Law we regularly assist clients in the negotiation and preparation of Binding and Limited Child Support Agreements and other child support issues.
If you would like to speak to a Wollongong Family Lawyer or Shoalhaven Family Lawyer about your family law issues, please contact us to arrange an obligation-free initial consultation in-person, by telephone, or online via zoom.