Child Support Agreements are becoming more popular in Family Court proceedings.
Parents are choosing to elect to move away from Child Support Assessments generated by the Child Support Agency (“the Agency”) to allow more flexibility and freedom in making decisions about how their child’s expenses will be met between them.
Parents may enter into a Child Support Agreement on the basis that:
- a child attends a private school;
- a client has private health insurance;
- a child participates in extra-curricular activities; and/or
- a client requires a greater level of health care treatment.
Parents also have the ability to agree on a weekly, fortnightly or monthly periodic amount to be paid to one parent for the day to day care of the child. This is separate to the payment of expenses referred to above. The amount can be based on:
- an agreement between the parties taking into account their financial circumstances and the costs of the particular child; or
- an assessed amount generated by the Agency through a Child Support Assessment (if obtained); or
- an estimate taken from the free online Child Support Estimate Calculator, which is referred to below in this article; or
- an amount based on one or all of the above options, on the proviso both parties agree.
The legislation which deals with parents entering into Child Support Agreements stems from the Child Support (Assessment) Act 1998 (“the Act”).
There are two types of Child Support Agreements parents can enter into:
- a Binding Child Support Agreement (“BCSA”); or
- a Limited Child Support Agreement (“LCSA”).
Binding Child Support Agreement (“BCSA”)
A BCSA is entered into pursuant to Section 80C of the Act.
Parents will require separate and independent legal advice if they wish to enter into a BCSA.
A parent does not need a Child Support Assessment before entering into a BCSA, however they might find it helpful to have an estimate of the child support a parent may be assessed to pay if an application was made to the Agency.
A parent can obtain an estimate using the Child Support Estimate Calculator at https://processing.csa.gov.au/estimator/About.aspx. A parent can remain anonymous and the information included is not provided to the Agency.
It is usually very difficult to set aside a BCSA once entered into. The circumstances in which the Court will set aside the BCSA are limited to times when it is appropriate in the “special circumstances” to do so. Section 136 (2) of the Act sets out the requirements to be met in setting aside a BCSA. The Court needs to be satisfied:
- the party’s agreement was obtained by fraud, or a failure to disclose material information; or
- a party to the agreement:
- exerted undue influence or duress in obtaining the agreement; or
- engaged in unconscionable conduct;
to such an extent that it would be unjust not to set aside the agreement; or
- that because of exceptional circumstances, relating to a party to the agreement or a child in respect of whom the agreement is made, that have arisen since the agreement was made, the party or the child will suffer hardship if the agreement is not set aside.
A parent should obtain their own independent legal advice specific to their circumstance about the process for entering into and terminating a BCSA.
A BCSA, is usually, valid and binding until the child turns 18 years old. A BCSA can provide some parents with security in knowing how their child’s expenses will continue to be met until the child is a legal adult and can reduce the level of involvement of the Child Support Agency.
Limited Child Support Agreement (“LCSA”)
A LCSA is entered into pursuant to Section 80E of the Act. The drafting of the LCSA is similar to that of the BCSA.
There is however differences between a BCSA and LCSA, namely:
- no independent legal advice is required for a LCSA;
- a LCSA is only be valid for a period of 3 years;
- a LCSA requires parents to have a Child Support Assessment in place;
- a LCSA requires the Agency to issue “nominal assessments” each year and if the amount payable under the nominal assessment is more than 15% different to the agreed amount payable under the LCSA, then either parent can give notice they wish to terminate the LCSA; and
- the test to be satisfied before the Court will set aside a LCSA is at a much lower standard (see section 136 of the Act).
If a LCSA is entered into then both parents will need to re-negotiate the terms of a further LCSA after the 3 year period. Alternatively, a parent can elect to return to the Child Support Assessment generated by the Agency.
A LCSA may also be set side under Section 136 of the Act if the Court is satisfied:
- that because of a significant change in the circumstances of one of the parties to the agreement, or a child in respect of whom the agreement is made, it would be unjust not to set aside the agreement; or
- that the agreement provides for an annual rate of child support that is not proper or adequate, taking into account all the circumstances of the case (including the financial circumstances of the parties to the agreement).
Matters to consider
When entering into a BCSA or LCSA, a parent should consider:
- the periodic amount to be paid by a parent;
- the portion to be paid by parents to:
- school fees and levies;
- school uniforms, prescribed school books, technology and stationary and school trips and camps;
- any extra-curricular activities (eg. sports, tutoring, music lesson) including uniforms and equipment;
- private health insurance premiums, including major medical and dental treatment;
- any travel expenses of children; and
- any other payments relating to the particular circumstances of their children.
Enforcement of a BCSA and LCSA
There are occasions when one parent fails to comply with the terms of a BCSA or LCSA.
Parents should consider lodging the BCSA and LCSA with the Agency in the event they require assistance with collection of unpaid periodic child support.
In the event you require the Agency’s assistance to collect unpaid child support, they are only able to assist in the collection of periodic child support (being the dollar amount one parent is to pay the other in child support), not non-periodic child support (being expenses relating to school fees, extra-curricular activities and the like). If negotiations did not resolve the matter, a parent would need to apply to the Family Court for Orders for the payment of non-periodic amounts.
The Agency is only able to collect unpaid periodic child support backdated to 3 months. A parent should contact the Agency as soon as possible in the event the other parent fails to comply with the terms of the BCSA or LCSA as it relates to periodic child support.
For information and advice relating to a parent’s particular circumstances, we recommend you seek independent legal advice.
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