A Guide to Binding Child Support Agreements
27 November 2023 · Read time: 6 minutes
A binding child support agreement is a written arrangement between parents or carers, specifying the terms and conditions for child support payments.
Both parties must sign the agreement, and legal advice is a prerequisite for its validity.
The agreement can set child support payments at an amount different from what would be payable under a standard child support assessment.
Key Components of a Binding Child Support Agreement
For a binding child support agreement to be considered valid, the parent receiving support needs to have a minimum of 35% care of the child.
Additionally, both parents are required to seek independent legal advice, with each obtaining a legal certificate.
Failure to adhere to this legal prerequisite renders the binding agreement invalid. However, it's important to note that an alternative option, the limited child support agreement, remains available in such cases.
Once the binding agreement is accepted, parents receiving support are afforded the flexibility to choose between private collect and child support collect options for payment receipt.
Furthermore, both parents bear financial obligations, including the timely payment of child support, the disclosure of care arrangements, prompt filing of tax returns, accurate reporting of income, and informing relevant authorities about any changes in circumstances.
These obligations are integral to the successful and lawful execution of the binding child support agreement.
Payment Options Within a Binding Child Support Agreement
- Periodic or Non-Periodic Payments: The payment amount within a binding agreement can vary and cover periodic or non-periodic items such as school fees or health insurance.
- Lump Sum Payments: Lump sum payments, either in cash or the value of a transferred asset, are permissible. However, these require a child support assessment, and the amount must meet or exceed the annual child support rate.
- Credit System: For lump sum payments, the credit system is employed, offsetting the payment against the annual child support rate until the credit is exhausted.
Managing a Binding Child Support Agreement
Before making a binding child support agreement, seeking legal advice is needed to understand the responsibilities involved.
Decide whether to negotiate the agreement with the other parent, use the Child Support Agreement form, or draft terms with legal assistance.
Submit the agreement and required documents, either in writing or over the phone, and await assessment results from the Registrar.
Ending a Binding Child Support Agreement
To terminate a current agreement, a new binding agreement must replace or supersede the existing one.
If both parties cannot agree on termination, a court application can be made, though this can be complex and costly.
See our article here about ending BCSPAs.
Relevant Legislation
The Child Support (Assessment) Act 1989 provides the legal framework for binding child support agreements, with specific sections outlining the process.
Types of Child Support Agreements
Transitional Agreements
Agreements made and accepted by the Registrar before 1 July 2008 continue to have effect, subject to different rules.
Termination Agreements
Specifically entered into to terminate the effect of an existing binding child support agreement, requiring legal advice for both parties.
Limited Child Support Agreements
Allowing flexibility in child support arrangements without the necessity of legal advice, but subject to specific conditions and administrative assessments.
What about the disadvantages of Binding Child Support Agreements?
While binding child support agreements offer flexibility, their long-term nature can pose challenges.
Events such as income changes may impact affordability, and terminating the agreement may require legal intervention.
Entering into a Binding Child Support Agreement comes with inherent drawbacks, one being its inflexibility as it cannot be altered once established. The only avenues for modification involve terminating the agreement through mutual consent or seeking court intervention to set it aside, which is complex and costly.
Additionally, the disadvantages often extend to the division of assets during property settlement, posing financial compromises for both parties. Legal advice may dissuade individuals from entering a BCSA, especially if the Child Support Agency (CSA) assessment indicates a potentially lower weekly payment. The decision to pursue a BCSA is a delicate balance between personal considerations and the welfare of the children involved.
Registering a Binding Child Support Agreement with the Child Support Agency establishes binding and enforceable obligations, creating a situation where deviating from the agreed terms can be challenging. Resiling from the terms typically requires court intervention, introducing a potentially lengthy and costly process for those facing adverse changes in circumstances after entering the agreement.
Since a binding child support agreement remains in effect until a terminating event, such as a child reaching 18 or completing secondary school, it could span a considerable duration.
It is crucial to recognise that unforeseen events may impact one's ability to meet the financial commitments outlined in the agreement. While parties can mutually agree to terminate the agreement in case of a significant drop in one parent's income, initiating this termination requires entering into a separate termination agreement, a process demanding legal advice from both parties.
Importantly, there is no obligation for someone to agree to termination, leading to potential disputes. In such cases, seeking court intervention becomes a viable but serious commitment, emphasising the need for careful consideration before deciding on a Binding Child Support Agreement.
What is the difference between a limited child support agreement and a binding child support agreement?
A limited child support agreement and a binding child support agreement differ primarily in the requirement for legal advice.
While both allow parents to customise child support arrangements, a binding agreement necessitates independent legal advice for validity.
Limited agreements, on the other hand, do not mandate legal advice but require an existing administrative assessment and adherence to specific conditions.
What is a binding child support agreement for an eligible carer?
A binding child support agreement for an eligible carer involves an arrangement between one or both parents and a non-parent carer who is eligible to receive child support.
This agreement, governed by the Child Support (Assessment) Act 1989, must be in writing, signed by the involved parties, and accompanied by legal advice certificates to be considered binding.
How can I legally stop paying child support in Australia?
Legally stopping child support payments in Australia can be achieved through specific processes.
If both parents agree, a new binding child support agreement can replace the existing one, terminating the obligation.
Alternatively, parties may apply to the court to set aside the agreement, a complex and potentially costly process. Seeking legal advice is crucial for understanding the legal avenues available.
Can a binding child support agreement be changed?
A binding child support agreement cannot be directly changed. To modify the terms, the existing agreement must be terminated, and a new binding agreement put in place.
The termination requires compliance with legal procedures, including obtaining legal advice and creating a termination agreement. It's essential to seek legal guidance to navigate the process effectively.
Conclusion
Binding child support agreements provide a structured and customisable framework for child support payments outside of the standard child support calculated payments.
Understanding the legal requirements, potential pitfalls, and the types of agreements available is important for parents navigating this terrain.
If you would like help with this type of child support agreement, then contact our team today! We are approachable and would love to help.
