When a separated couple has children, there will normally be:
- a property settlement or binding financial agreement and;
- parenting orders; or a parenting plan.
Usually, one parent will be required to pay the other parent child support. While this amount can be determined by a specific calculation, in some instances a separated couple may instead opt for a binding child support agreement. That is, a detailed formal document that both parties agree to. In this article, we explore the advantages and disadvantages of binding child support agreements.
How Child Support Works
When going through the child support process there are alternative child support options:
- pay child support as assessed by Services Australia (formerly known as the Child Support Agency); or
- Parents can agree between themselves as to what their arrangements are. For example, both parents deposit an amount into a bank account each week then both use that bank account to pay for the children’s expenses. Obviously there has to be sufficient of trust between parents for such an arrangement to work; or
- enter into a limited child support agreement, which is in place for up to three years. With this type of agreement, you have to be paying at or above the amount of child support assessed by Services Australia.
- obtain child support departure orders from the Court. But there must be a child support assessment in place and there are criteria that you must satisfy before the Court will make a child support departure order. A child support departure order essentially outlines that someone should be paying more or less than what the child support assessed amount is.
When are Binding Child Support Agreements made?
Generally speaking, binding child support agreements are discussed when you are working out your property settlement and parenting arrangements.
Often when parents are negotiating regarding property matters, they will also agree to enter into a binding child support agreement. This gives the parents certainty in terms of what financial assistance will be in place for the children in future. It also allows people to plan their financial future because they know what is happening with any property and can work out what will happen with child support.
The standard child support assessment completed through Services Australia cannot enforce the payment directly to a third party of payments such as private school fees, music lessons and other extra-curricular activities. The amount of child support payable can be increased if Services Australia are satisfied that there is a special reason to do so, but they cannot enforce payment being made to the third party.
A common reason to get a binding child support agreement is if one parent harbours concerns that the other parent may not in future fulfill their verbal agreement to cover particular expenses.
What are the Advantages of a Binding Child Support Agreement?
Binding child support agreements have many benefits for both parties to the agreement.
Having a binding child support agreement give parents security and certainty and allows them to make arrangements that suit their particular family circumstances at the time.
A binding child support agreement also allows for funding arrangements to be outlined if the parents plan to enrol their children in private schools. The agreement can cover who pays the school fees and also outline things such as medical payments, private health insurance and extracurricular activities.
Parents may also decide to enter into a binding child support agreement if they have a child with significant medical or educational needs. Detailing the costs associated in a binding child support agreement gives them a sense of security and certainty.
Once the binding child support agreement is registered with Services Australia, it can be registered with the Federal Circuit and Family Court of Australia (FCFCA). If somebody does not comply with the agreement, the FCFCA can enforce its provisions.
What are the Disadvantages of a Binding Child Support Agreement?
A binding child support agreement is in place until there is a terminating event, such as a child turning 18 or finishing secondary school. Numerous events could happen during that period which can impact a parent’s ability to afford their agreed child support agreement.
Parties can agree for a binding child support agreement to be terminated if one parent’s income drops below a certain level. To end the agreement, you must enter into a termination agreement, which requires both parties to get legal advice.
If one parent refuses to enter into a termination agreement, the other parent must apply to the FCFCA to get the agreement terminated. A binding child support agreement is a serious commitment which should be well thought out before making any decisions.
What should I do when considering a Binding Child Support Agreement?
If you decide to pursue a binding child support agreement, work out what your children’s expenses are. Take into consideration the cost of school fees, sports gear, school uniforms, stationery and the like.
Then think about what it is you really want this agreement to cover. Get some financial advice about budgeting, working out how much on average you spend on your children per week, and how you will manage your funds.
Take into consideration both of your financial circumstances and work out what is going to be achievable for both of you running two separate households.
A child support agreement may be conditional on several elements. It may be part of a package deal in that it comes into effect when the property settlement is finalised.
What now?
For a binding child support agreement to be binding, it is a requirement that you get independent legal advice about the effect of the agreement on your rights and the advantages and disadvantages of entering into the agreement at the time.
You do not have to get legal advice with a limited child support agreement although we recommend that you do. Some parents prefer the flexibility of being able to renegotiate a limited child support agreement. But for some parents that introduces too much uncertainty. Contact us for advice about whether a binding child support agreement is the right option for you. We can also advise you about negotiating an agreement as part of your property settlement.
