Child Support Agreements are a useful tool for parents to use where there is agreement as to the amount of child support payable.
Child Support Agreements bypass the use of the Child Support formula to allow parents to agree on terms of payment.
How do you create a Child Support Agreement?
There are two (2) ways in which a Child Support Agreement can be formulated:-
1. Binding Child Support Agreement
Binding Child Support Agreements are written agreements for child support signed by both parents after getting independent legal advice about entering into or ending an agreement.
This legal advice must be provided by a legal practitioner who has been admitted by the Supreme Court of a State or Territory of the Commonwealth of Australia and holds a current practising certificate.
The legal practitioner must provide a statement they have provided the parent with independent legal advice as to the effect of the agreement on their rights and the advantages and disadvantages of entering into such an agreement.
The agreement must include an acknowledgement of this advice.
A Binding Child Support Agreement can be made and accepted, even if a child support assessment has not been made. The agreement can be made for any amount that both parents agree to.
2. Limited Child Support Agreement
Limited Child Support Agreements are formal agreements for child support that are in writing and signed by both parents.
Legal advice is not needed before entering into a Limited Child Support Agreement.
Before the Department of Human Services (Child Support) (“the Department”) can accept a Limited Child Support Agreement:
- there must be a child support assessment already in place; and
- the annual rate payable in the agreement must be equal to, or more than the annual rate of the child support assessment.
Importantly, a Limited Child Support Agreement can only be in place for a maximum of three (3) years. After this time, either parent can terminate the agreement.
Lump sum payments
A Child Support Agreement can include lump sum payments including transfer of property, to be credited as child support, instead of monthly cash or electronic payments.
A child support assessment must be in place for lump sum payment agreements.
The lump sum must be equal to or greater than the annual child support rate under that assessment.
The lump sum will be credited at the rate of 100% of the child support payable, or at a lesser rate if specified in the agreement.
The remaining lump sum will be indexed every year by the Consumer Price Index as published by the Australian Bureau of Statistics (“the ABS”).
Notional assessment
When a Child Support Agreement is accepted, the Department will make a provisional notional assessment of how much child support would be payable if an agreement was not in place.
The provisional notional assessment is given to both parents to check that their circumstances are properly reflected.
Parents have fourteen (14) days from when it is issued to contact the Department and update their details, if necessary.
The provisional notional assessment becomes a notional assessment fourteen (14) days after it is issued or when all requests to vary details have been finalised.
The notional assessment amount is used in calculating the relevant amount of Family Tax Benefit Part A as determined by the Australian Department of Human Services (Centrelink) (“Centrelink”).
The notional assessment is updated:
- every 3 years;
- if the amount of child support payable under the agreement changes by more than 15%; and
- for limited agreements, whenever either parent asks for a new notional assessment.
When is a Child Support Agreement terminated?
The child support legislation provides that a child support agreement may be terminated by:-
- entering into a new agreement;
- a court order; and
- if a Limited Child Support Agreement is more than three (3) years old.
Parties to a Child Support Agreement are not able to vary the terms of the agreement.
A new Child Support Agreement must be entered into.
How is a Child Support Agreement set aside?
If either party are able to establish the following grounds, a Court may set aside a Child Support Agreement:
- where the agreement of one of the parties was obtained by fraud, undue influence or unconscionable conduct;
- where there has been a significant change in circumstances;
- where the annual rate of child support payable under the agreement is not proper or adequate; or exceptional circumstances arise after the agreement is made.
