Practicalities of Child Support Agreements
Child Support is the payment made by one parent to another to assist with the costs of raising children. Child support is usually paid until children are 18 years of age.
There tends to be 3 types of child support arrangements;
No Formal Arrangement
Child Assessment
Child Support Agreements (binding and limited)
1. No formal arrangement
Many separated parents have no formal arrangements in place for child support and instead might agree on an amount that will be paid by one parent to the other or to each be responsible for particular expenses. Sometimes parents obtain an ‘Assessment’ of Child Support from the Department of Human Services to use as a guide, but don’t require the assistance of the Department to collect or organise those payments. Often these parents have no involvement with the Department and simply make private arrangements.
2. Child Assessment
After separation, either you or your partner can apply to the Department of Human Services for an assessment of Child Support. The Department can also ensure that those amounts are paid. Some families will opt for a ‘private collect’ arrangement, meaning one partner pay direct to the other while other families will opt for an ‘agency collect’ arrangement.
3. A Child Support Agreement
Child Support Agreements (both limited and binding) are used to set out how your child or children should be supported financially by either or both parents.
Child Support Agreements are essentially private agreements between the parties which can be used to specify, limit or reduce the amount of Child Support required to be paid by one party compared with the standard formula assessment conducted by the Child Support Agency.
Which agreement is right for you will ultimately depend on your particular circumstances at the time of entering the agreement and/or any anticipated future changes you expect with your work, living circumstances or income.
There are 2 types of Child Support Agreements;
Limited Child Support Agreement (LCSA)
Binding Child Support Agreement (BCSA)
Both Binding and Limited Child Support Agreements have their benefits and limitations.
Which agreement is right for you will ultimately depend on your particular circumstances at the time of entering the agreement and/or any anticipated future changes you expect with your work, living circumstances or income.
Limited child support agreement
LCSA allows parents some flexibility to determine their own child support arrangements. Limited child support agreements do not require the parties to have received legal advice before entering into the agreement.
For this agreement to be accepted, it must be at least the annual rate of child support that would be paid if applying for a child assessment through Department of Human Services.
A LCSA cannot be varied.
Binding Child Support Agreement
A BCSA operates in a similar manner to financial agreements that separating parents might make in relation to property settlement.
Both parties must have received independent legal advice before entering the agreement and must also receive independent legal advice before terminating the agreement.
There is generally no requirement for an administrative assessment to be in place prior to the making or acceptance of a binding child support agreement.
6 Significant Differences between Binding and Limited Child Support Agreements.
LCSA must already have a Child Support Assessment in place.
BCSA do not require an assessment in place and can be entered into with or without a Child Support Assessment.
The amount payable under the LCSA must be equal to or greater than the amount payable under the Child Support Assessment.
A BCSA can range from a periodic payment of NIL to a specific amount for each child; thereby providing more flexibility to the parties.
A LCSA can be ended unilaterally (without agreement) by providing notice as long as the agreement has been in place for a period of 3 years.
A BCSA does not have this characteristic and will end upon the making of a new BCSA effectively terminating or replacing the previous agreement or when the child turns 18 years of age or completes secondary school (whichever is the latter) or by a court order.
A LCSA does not require the parties to obtain independent legal advice in relation to the agreement.
A BCSA requires both parties to obtain independent legal advice and for their legal advisors to issue a Section 80C Certificate which ultimately states that you have received advice pertaining to the effect of the agreement on your rights as well as the advantages and disadvantages at the time the advice was provided.
Therefore, a LCSA is a more cost-effective option in this aspect.
The terms of a LCSA do not take effect unless and until it is registered by the Child Support Agency.
A BCSA can take effect on the day the Agreement is finalised and either party will be at liberty to register the agreement with the Child Support Registrar.
A LCSA can be terminated by either party providing 60 days’ notice if the notional assessment changes by more than 15%. Variables which affect notional assessments are the change in either party’s taxable income, change of care arrangements and the childrens’ ages.
A BCSA does not contain this element and therefore provide greater certainty to both parties.
Christina Salvo, is the founder and CEO of Simple Separation a ‘child-focused’ Divorce Settlement service. For information on Binding Child Support Agreements, visit Simple Separation and book a free 30 min consultation. Please share this article on social media.