Child Support

Separated parents may reach agreements in respect of the financial support of their children. In the absence of agreement, either parent may apply to the Child Support Agency (“CSA”) for an assessment of the other parent for child support. The CSA has a number of formulas using the taxable income of the parents.

Child Support Agency assessments

The CSA has a number of different formulas. The most commonly used formula takes into account both parent’s income (subject to the same self support amount for both parents which is disregarded). The total combined child support income for each parent (disregarding the self support amount) is then used to determine the average cost spent by parents on their children reflecting their income level. Those costs are apportioned between the parents reflecting their share of the combined child support income and also the care arrangements for the children.

We can perform the child support calculations for you and explain how they work. Contact us if you would like to receive a copy of our ten page summary of child support or obtain further information..

Review of formula

The assessment can be reviewed by a child support review officer in special circumstances including:

  • the capacity of either parent to support the children is significantly reduced because their duty to maintain another person or child including themselves;
  • the capacity of either parent to support children is significantly reduced because of high cost in exercising contact;
  • special needs of the child including the costs of caring for or educating the child in a way in which the parents had intended before separating;
  • the assessment is unjust and inequitable because of the payer’s income, earning capacity, property or financial resources;
  • the assessment is unjust or inequitable because of a prior payment or transfer of property made to the payee parent for the childrens’ benefit;
  • high child care costs (exceeding 5% of carer’s income) for a child under twelve years of age.

If a parent is dissatisfied with the decision of the child support review officer, an application may be filed in the court seeking variation of child support.

The CSA can only issue assessments in respect of children under the age of eighteen years or, where children turn eighteen in their last year of school, until the end of their last year of school. Applications must be made before the child turns 18. Applications may be made to a court in respect of child maintenance for children over eighteen who have left school.

Child Support Agreements

Separated parents can enter into two different types of child support agreements.

Limited Child Support Agreements

Limited child support agreements must be in writing and signed by each party. They can only be made in relation to a child in respect of whom an application for administrative assessment could be made. That is, a child who is under 18 year, not in a relationship of their own, is in Australia or is an Australian Citizen or has an ordinary residence in Australia. There must be an administrative assessment of child support in place in respect of the child. A limited child support agreement has no effect unless and until it is accepted by the Child Support Agency.

The agency is only able to accept a limited child support agreement which provides for a level of child support which is not less than the rate that would otherwise be payable under a formula assessment. This can include provision for child support of a non-parenting manner. That is, by way of a lump sum or payment of expenses directly to third parties.

Significantly, a limited child support agreement can be unilaterally terminated by one parent by giving written notice following the expiry of three years from entering into the agreement, or upon the amount to be paid pursuant to the Agreement deviating more than 15 % from child support payable pursuant to a formula assessment.

A limited child support agreement can therefore be terminated in the following five ways:

  • Both parents agreeing to enter into a new child support agreement.
  • Both parents agreeing in writing to terminate the child support agreement.
  • A court order setting aside the agreement. See 7 below.
  • After 3 years from entering into the Agreement, either parent can unilaterally advise the other and the Child Support Agency of their intention to terminate.
  • A parent can request the issue of a new Notional Assessment at any time. If the Notional Assessment differs by more than 15% from the Child Support Agreement, either parent has 60 days to give notice to unilaterally terminate the agreement.

Limited child support agreements therefore have much less certainty and finality than binding child support agreements. Limited child support agreements therefore have a statutory sunset clause of three years (whether stated in the agreement or not). Lawyers advising in respect of child support agreements will need to consider whether the agreement is intended to be and is, in fact, a limited or a binding child support.

Binding Child Support Agreements

Binding child support agreements must meet the same requirements as for a limited child support agreement excepting the following two points:

  • Parties to a binding child support agreement must obtain independent legal advice and have lawyers sign the Certificate of Independent Legal Advice.
  • Binding child support agreements can provide for a lower rate of child support than would be payable under a formula assessment.

A Binding Child Support Agreements can provide for the payment of less child support than would be payable under a formula assessment. This can however impact on a parent’s entitlement to Family Tax Benefit. Family Tax Benefit Part A will be calculated as if the child support agreement had not been made. That is, it will be calculated as if the payee parent had been receiving child support at the amount payable pursuant to a formula assessment.

To facilitate this, the Child Support Agency must issue a Provisional Notional Assessment when accepting a child support agreement, setting out what would be payable without the agreement.

Lawyers providing the necessary independent legal advice in respect of binding child support agreements should explain the impact of child support agreements on the entitlement of parents to receive Family Tax Benefit Part A.

Binding child support agreements cannot be unilaterally terminated in the same way as Limited Child Support Agreements. They can only be terminated as follows:

  • By both parties agreeing to enter into a new binding child support agreement.
  • Both parties agreeing to enter into a written Termination Agreement. Independent legal advice would be required.
  • By a court order setting aside the binding child support agreement.

Court Applications to set aside a Child Support Agreement

Section 136 of the Child Support (Assessment) Act has been amended to allow for a court to set aside a child support agreement in certain circumstances including:

  1. That a parties agreement was obtained by fraud or a failure to disclose information, or;
  2. That a party to the agreement (or someone acting for them) has exerted undue influence or duress or engaged in unconscionable conduct so that it would be unjust not to set aside the agreement, or;
  3. In respect of a limited child support agreement, (i) Due to a significant change in the circumstances of one of the parties or a child the subject of the agreement, it would be unjust not to set aside the agreement, or; (ii) That the agreement provides for an annual rate of child support that it is not proper or adequate, or
  4. In the case of a binding child support agreement, that because of exceptional circumstances, relating to a party or the subject child, that have arisen since the agreement was made, the applicant or the child will suffer hardship if the agreement is not set aside.

Child maintenance for children over eighteen years

A parent or a child can make an application to a court seeking that one or both parents make payments to the child or the other parent to meet the costs of the child. This can only be done when the child needs the ongoing financial support due to health or educational reasons. The most common ground to seek child maintenance is when the child is attending tertiary education.

In assessing child maintenance for children over the age of eighteen years, there is no standard formula used by the court. The court will look at the following factors:

  • the financial needs of the child;
  • the capacity of the child to meet their financial needs (including some possible part-time employment);
  • compare the financial ability of each parent (after meeting their own reasonable needs and expenses) to contribute to the needs of the child.

Separated parents commonly reach agreements in respect of financial support for their children.

In the absence of agreement, either parent may seek to have an assessment of child support issued by the Child Support Agency. If agreement can be reached, parents can document the agreement in a binding child support agreement.

In some circumstances, however, this may not be advisable depending upon a parent’s current or future financial circumstances.

Child support can be complicated, and impact on parent’s entitlements to Family Tax Benefit. Contact us if you would like to receive a copy of our ten page summary of child support or obtain further information.

 

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