When a couple is separating and they have children, there will normally be a property settlement and parenting orders involved. More often than not, one parent will also be required to pay the other parent child support.
While this amount can be determined by a specific calculation, in some instances a separating couple may instead choose to 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 choosing a binding child support agreement.
To start though, let us explore how child support works .
How Child Support Works
When going through the child support process there are alternative options other than just a binding child support agreement.
One of the alternatives is by paying child support as assessed by Services Australia (formerly known as the Child Support Agency). Or, sometimes parents just agree between themselves as to what their arrangements are. For example, both parents routinely deposit a certain amount of money into a bank account each week and then they both use that bank account to pay for the children’s expenses.
Obviously there has to be a certain level of trust between parents for such an arrangement. But that does work for some people where parents are able to reach an agreement between themselves.
Another option is to enter into a limited child support agreement, which is only in place for a maximum period of three years. With a limited child support agreement, you have to be paying either at or above amount of child support assessed by Services Australia.
The other way you can seek child support is to obtain from the Court what is known as child support departure orders. But to do so there needs to be a child support assessment in place and there is a particular criteria that you need to satisfy before the Court would make such an 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 Binding Child Support Agreements are made
Generally speaking, binding child support agreements are discussed when you are working out your property settlement and parenting arrangements.
Often when parents are reaching a deal with their property matters, they will also strike a deal about entering into a binding child support agreement. This is purely because it gives everyone certainty in terms of what financial assistance is going to be in place for the children moving forward. This also allows people to plan their financial future because they will know what is happening with any property and they can also work out what is going to happen with the child support side of things.
The standard child support assessment completed through Services Australia cannot enforce somebody to pay directly to a third party, payments such as private school fees, music lessons or other extra-curricular activities. They can increase the amount of child support to be paid if they are satisfied that there is a special reason to do so, but cannot enforce payment being made to the third party.
The Advantages of a Binding Child Support Agreement
Binding child support agreements have many benefits for both parties involved. Firstly, they give security and certainty to parents. Having a binding child support agreement allows parents to make specified arrangements that suit their particular family circumstances at the time.
Another reason people have binding child support agreements is if they have children who they are planning on sending to private schools. This type of agreement allows for funding arrangements to be outlined.
In addition to covering who pays the school fees, the agreement can also outline things such as private health insurance, medical payments and extracurricular activities.
People may also decide on entering 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 will give them a sense of security as well as certainty, as opposed to what the standard child support assessment does.
Once the binding child support agreement is registered with Services Australia, it can then be registered with the Family Court. Then if somebody does not comply with it, you can enforce the agreement through the Family Court.
The Disadvantages of a Binding Child Support Agreement
Because a binding child support agreement is in place until there is a terminating event, such as a child turning 18 or finishing secondary school, this can be a very long time for some people. It is important to be aware that there are numerous events that could happen in time that can impact a parties 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. But in order to end the agreement, you then have to enter into a termination agreement, which requires both parties to get legal advice.
There is also nothing requiring someone to enter into a termination agreement. So, if one parent refuses to enter into the termination agreement, then you have a situation whereby you have to apply to the Court to get the agreement terminated. So it is a serious commitment and should be well thought out before making any decisions.
What to do first when considering a Binding Child Support Agreement
If you decide to pursue a binding child support agreement, first put pen to paper and work out what your children’s expenses are. Take into consideration school fees but also include the costs of uniforms, stationery, sports gear and other things like that.
Then think about what it is you really want this agreement to cover. It would also be wise to get some financial advice in terms of your budgeting and working out how much on average you spend on your children each week and how you are going to manage your funds.
Take into consideration both of your financial circumstances and work out what is going to be achievable for both of you moving forward as you run two separate households.
This is why binding child support agreements are often discussed in the context of working out how the separating parents are going to divide the property.
So it might be that a lot of the time people will reach agreements that are conditional upon a number of elements. This means you would probably be entering into a child support agreement that will come into effect when the property settlement comes. This is what we often refer to as a package deal.
Obtaining advice is essential
With binding child support agreements, it is a requirement that in order for it to be binding, you have to get independent legal advice and you must receive advice about the effect of the agreement on your rights advantages and disadvantages of entering into the agreement at the time you are entering into it.
However, you do not have to get legal advice with a limited child support agreement although we always recommend that you do. Some parents prefer a limited child support agreement because they like the flexibility of being able to renegotiate. But for some parents that provides too much uncertainty.
If as a parent you are worried that certain costs are not going to be met, then you need to speak to a lawyer about whether a binding child support agreement is the right option for you. You can also seek advice about trying to negotiate the agreement as part of your property settlement.
If you found this article interesting, leave a comment or share it with your team, colleagues and clients.
Phillips Family Law is an award winning Family Law practice serving clients across Australia and abroad. Regardless of where you are in your decision making process, we can make you aware of your options. To discuss your situation confidentially phone +61730079898 or secure a time by clicking here.