What is a Child Support Agreement?
A child support agreement is one way of defining the responsibilities of each parent when it comes to splitting the cost of caring for the children.
When parents separate or divorce and decisions are made as to who the children of the relationship will permanently or primarily reside with, it is important that certain arrangements be put in place to protect the financial security of the parent who assumes the role of primary caregiver. One such arrangement is a child support agreement. A child support agreement is similar to a financial agreement of the kind separating partners might enter into in respect of property.
The agreement will define the responsibilities of each parent when it comes to splitting the cost of caring for the children. Because a child support agreement is a legally enforceable financial agreement, the parties should obtain professional legal advice before creating and entering into one.
What is a child support agreement?
A child support agreement is a written agreement between two separating parents concerning when, how, by who and in what amount payments are to be made towards financially supporting the children of the relationship. The terms of the agreement are negotiated by the parties, and will depend on each parent’s percentage of care of the child or children. Importantly, a parent is only eligible to receive child support if they have, at a minimum, 35% care of a child.
Amount, frequency and form of payment
The amount payable under a child support agreement can be any sum, so long as the parties agree. The amount can be more or less than what would be prescribed under a child support assessment. A child support assessment is an independent assessment undertaken in accordance with a statutory formula to determine the amount of child support a person needs to pay or receive based on the circumstances of both parties, including income, age of the child, and care percentage. The parties may (but need not) apply for a child support assessment and base the terms of their agreement on that assessment.
The parties can provide for payment to be periodic (paid at regular intervals), non-periodic (for instance, in the form of a lump sum), or a combination of both. If the parties settle upon a lump sum payment, a child support assessment will need to be done. The lump sum amount should be equivalent to or exceed the annual child support rate payable per the child support assessment. The paying parent will be liable to pay their regular periodic child support payments once that lump sum runs out, unless it truly is a “once and for all” payment capable of satisfying the paying parent’s obligations (which last until the child turns 18).
Child support need not be monetary. The paying parent may instead elect or be required to contribute by providing goods and services, or by covering schooling fees. The parties can provide for the specific form of payment in their agreement or take a more flexible approach.
Types of child support agreements
There are two kinds of child support agreements: binding agreements and limited agreements. The two differ in terms of their durability, how easily they can be amended or terminated, and the requirements for their creation.
Binding child support agreements
A binding child support agreement can be created in the absence of a child support assessment. Both parties must obtain independent legal advice prior to entering into the agreement.
A binding child support agreement must:
- be in writing
- be signed by both parents
- include a statement confirming that both parties have received independent legal advice prior to signing
- include, as annexures, certificates signed by the practitioners who provided legal advice to the parties
A binding child support agreement is more permanent and durable. It remains in place up until the children concerned reach the age of 18. It cannot be varied and will remain binding even where one or both of the parties experience a material change in circumstances such as loss of employment, reduced income earning capacity or bankruptcy.
Limited child support agreements
A limited child support agreement requires that a child support assessment be in place, but there is no requirement that the parties receive legal advice before entering into the agreement.
A limited child support agreement must:
- be in writing
- be signed by both parents
- provide for child support to be paid at least at the annual rate of child support payable by the paying parent under the child support assessment
A limited child support agreement is more flexible and can be more readily exited out of than a binding agreement. A limited agreement has a maximum lifetime of 3 years but can be extended beyond that or terminated at an earlier point if the parties so agree in writing.
How do I make or receive payments under the agreement?
There are different options to choose from when it comes to making and receiving child support payments. The main methods are private collection and child support collection. Which method works best will depend on how desirable or practical it is for the paying parent and the receiving parent to be dealing with each other directly versus at arm’s length and/or through an intermediary.
Private collection involves the parties reaching agreement as to how and when child support, based on the child support agreement, is to be paid and managing the payments between themselves. The advantages of this approach include the capacity for flexibility, and the fact that the parties can remain wholly in control of the process.
Child support collection
Child support collection involves Services Australia taking the helm. Services Australia will determine and advise the parties how and when to pay, and will collect payment from the paying parent and transfer that payment to the receiving parent. This method may be preferable where the parties find it difficult to navigate child support without the oversight and guidance of a neutral third party.
- Creating a child support agreement is one way for parents to formalise arrangements regarding financial contributions towards the care of children of the relationship post-separation.
- The parties can negotiate and set terms with respect to when, how, by who and in what amount child support payments are to be made.
- Child support agreements are legally enforceable agreements and may vary in terms of durability and flexibility.
It is vital that each party consider their options and seek legal advice prior to entering into a child support agreement. For further information or for advice in any family law matter, 0ur team of family law experts is here to help.
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