Sadly, relationships sometimes end. If no children are involved, it’s typically a case of dividing the ‘money’ – after which the former partners can go on their separate paths. But if there are children of the relationship, the parents will be faced with the question how those children will be financially supported into the future.
In many cases, parents separate and divorce amicably and come to an amicable agreement about child support payments. This can be as simple as a ‘handshake’ deal where, for example, one parent agrees to pay the other $X per week and/or non-periodic costs such as the children’s school fees and private health insurance premiums.
However, the problem with these informal agreements is that they are not legally binding. So, if one party changes their mind, the agreement cannot be enforced.
The fallback in that situation is for parents to apply through the Child Support Agency for a child support assessment. The Agency uses a complex formula to calculate how much each parent should pay, based on several factors, such as:
- The number of children and their ages;
- How much time each parent has the children in their care; and
- The parents’ incomes (including adjustments)
Each variable can cause the child support payment to rise or fall. As a result, some parents may find this Agency daunting to navigate. Some parents have an agreed outcome, but want it to be binding and enforceable, as they wish to say out of the Child Support Agency scheme – those parents may want to look at a Child Support Agreement.
What’s a Child Support Agreement?
A Child Support Agreement is a legally enforceable, signed agreement between parents (or non-parent carers). It sets out how much support (both periodic and non-periodic) will be provided by parents, and when.
Child Support Agreements are therefore ideal for parents who do not want to live within the Agency ‘system’ of child support, and who want to have their own agreement with their co-parent about the support of children, but who want that agreement to be binding and enforceable.
In many cases, the Child Support Agreement is negotiated and signed at the same time as the documents which record the division of the assets.
There are two types of Child Support Agreements:
- Limited Child Support Agreements
- Binding Child Support Agreements
Limited Child Support Agreement
A limited Child Support Agreement is a formal agreement that doesn’t require legal advice. They can only be in place for a maximum of three years.
Before signing a limited child support agreement:
- There must be a child support assessment in place (via the Child Support Agency)
- The annual support to be paid under the Agreement must be at least the support mandated by the Child Support Agency
Limited Child Support Agreements are for parents who want to stipulate their own outcome for child support, but across a limited timeframe. This might be because they don’t want to be ‘locked into’ commitments for more than the defined period. Once the Agreement comes to an end, parents can then renegotiate or go back on to the Child Support Agency’s administrative assessment.
Binding child support agreement
A binding Child Support Agreement is a formal agreement that doesn’t require a child support assessment to be running alongside it (like a limited Agreement). However, unlike a limited Agreement, both parents are required to obtain legal advice before entering into and signing the binding Child Support Agreement.
The support can be made for any amount, just as long as both parents agree, and can include any combination of:
- Periodic payments – for example, one parent paying the other $X per week or month;
- Non-periodic items – such as the children’s school fees, health insurance, out-of-pocket medical costs and extra-curricular activity expenses;
- Lump-sum payments –where a capital sum (such as the proceeds from the sale of a property) are credited towards the child support obligations of the payer parent at an agreed rate. Often, this is done at a ‘discounted’ rate so the ‘credit’ lasts longer – as the payee parent has the benefit of lump-sum cash.
Binding Child Support Agreements typically suit parents who want longer-term arrangements that last, for example, until the youngest child turns 18 years of age or completes high school, or some other target event or milestone.
For the parent receiving child support, this might be important because they want to be sure that support will continue until defined points. For the paying parent, this might be important because they wish to plan for this financial commitment, and ‘fixing’ the support allows this planning.
Changes of circumstances and binding Agreements
Binding Child Support Agreements typically last for long periods of time. However, this doesn’t mean the level of support can’t be changed – for example, if the payer parent loses their job or suffers a drop in income. Such contingencies can specifically be provided for within the terms of the Agreement – for example, that obligations reduce (either in part, or in full) upon the happening of specified events.
They can also have a defined future termination date within their terms – known as a ‘sunset clause’. For example, the Agreement can terminate on its 10-year anniversary.
What about getting out of a binding Child Support Agreement?
Parents must apply to the court to have the Agreement terminated. However, this can only be done in limited circumstances – so simply changing your mind won’t cut it.
Negotiating and signing a binding Agreement should therefore be approached with planning and care, with particular consideration given to:
- What the future might hold for each parent; and
- Whether there should be checks and balances within the terms of the Agreement to account for changes in circumstances.
We Can Help
Child Support Agreements can be a useful option for parents but are tricky legal terrain to navigate. We’ve helped people from all walks of life through family law situations and we can help you too.
BGM Family Lawyers is a Specialist Gold Coast Family Law firm providing expert family law advice and legal representation.
To recieve expert help, call us on 1300 246 529 or contact us through our website – we can even see you remotely/electronically (MS Teams, Zoom, telephone).
