Parents have an obligation to provide for their children financially. If you are going through separation, financial arrangements can change, and the children can be impacted if a parent ceases contributing to the expenses of the children.
How do you ensure that your children’s expenses will be met?
The Australian Government is the first option available for most separated parents. The Child Support Registrar uses a formula to determine the standard rate of child support that is payable for a child based on the following:
- The income of the respective parents.
- The amount of nights the paying parent spends with the child.
There is a useful online calculator on the Government website that estimates the rate of child support using the formula. We recommend all our client’s querying their child support obligations to review the online calculator.
If, however, a parent contributes towards other expenses for a child, such as private school fees, private health insurance premiums, day care facilities or any other costs, these are not automatically credited towards a government assessment, meaning; a parent could end up paying well over the assessed amount of child support.
In these circumstances, we recommend parents enter into a Child Support Agreement.
There are two forms of Child Support Agreements:
- Binding Child Support Agreement; and
- Limited Child Support Agreement
The differences are significant, and it is essential you obtain legal advice before entering into either agreement to understand their terms and the financial impact of the agreement.
Binding Child Support Agreement
This is a strict contract between parents that provides a binding and enforceable agreement until the child turns 18 years of age or in accordance with the terms as set out in the Agreement. The Agreement cannot be terminated unless the parties enter into another agreement to terminate the agreement and/or it is set aside by a Court.
The requirements for a binding child support agreement to be valid include:
- that the agreement is in writing and signed by both parents;
- that the agreement includes a statement to the effect that each party has received independent legal advice as to the effect and advantages and/or disadvantages of the agreement, before it was signed; and
- include an annexure, for each of the parties to the agreement, signed by the person who provided the legal advice, which certifies that the advice was provided.
These types of agreements are most appropriate for parents who wish to enforce agreements reached on a final basis and where there is capacity for the paying parent to meet the terms of the Agreement.
The costs associated with a Binding Child Support Agreement are higher due to the requirement that both parties be independently legally represented and in order to obtain the requisite certificate. The lawyers are required to provide a detailed level of legal advice to satisfy the requirements as set out in the legislation.
Limited Child Support Agreement
These are aptly named limited due to the limited time frame within which they operate.
A parent can elect to terminate a Limited Child Support Agreement after the agreement has been in place for a period of three years and/or if their financial circumstances change more than 15% of the formula-based government assessment of child support. This provides parents piece of mind if they are unsure of their financial futures and do not want to be tied to a Binding Child Support Agreement.
The Limited Child Support Agreement can only be entered into between parents who already have a government child support assessment in place.
Unlike the Binding Child Support Agreement, the Limited Child Support Agreement does not require the parents to obtain independent legal advice which can save the costs associated with legal fees. We still recommend before anyone enters into this agreement to get legal advice to understand the terms of the agreement before signing.
If you believe you are entitled to child support or if you would like to understand your child support obligations, please contact our office to discuss the different options available to you.
