An Update on Parents' Options
Following the breakdown of a relationship in matters involving children, the law states that each parent has an obligation to maintain the child or children of that relationship. Accordingly, child support, the financial support provided to one parent from the other for the benefit of the child or children of a relationship, is a common source of questions for parents upon separation. How much does the paying parent pay? How is this payment made and how often? For how long will such payments be made? Will the payment be sufficient to contribute to the financial support of the child or children?
The answers to all such questions are dictated by a child support arrangement in place between the parents. This arrangement can take the form of an informal agreement, a Binding Child Support Agreement, or an assessment by the Child Support Agency.
Informal Child Support Agreement
An informal child support agreement is an arrangement whereby two parents reach an oral or written agreement as to the amount of child support to be paid and the frequency of such payments. Informal arrangements are more common in circumstances of an amicable separation and may be preferred by parents who want to be flexible and who do not wish to seek legal or government intervention into their arrangements.
If such an arrangement fails, it would be prudent to consider a Binding Child Support Agreement or seek a formal assessment of child support from the Child Support Agency.
Binding Child Support Agreements
A Binding Child Support Agreement is an agreement formally drafted within the ambit of the child support legislation and the Family Law Act. Such Agreements provide certainty to the parents about the amount of child support payable for a defined period, the amount and period being part of the agreement between the parents. The child support payable need not be based on any specific formula, and may include lump sum payments, payments by instalments and/or payment of specific expenses such as school fees or insurance premiums.
Being a formal, and therefore legally binding agreement, a Binding Child Support Agreement may only be terminated by:
- a Court Order in limited circumstances such as fraud, duress or where changing circumstances render the terms of the Agreement unfair to the child(ren);
- an updated Binding Child Support Agreement; or
- a Termination Agreement.
Both parents are required to obtain independent legal advice when entering into a Binding Child Support Agreement and likewise when entering into a Termination Agreement. Such independent advice is to be confirmed in a Certificate of Independent Legal Advice attached to the Agreement which is signed by both parents and their respective lawyers at the time of signing the Agreement. The legal advice must at least include the effect of the Agreement on the rights of the parent, and the advantages and disadvantages of the Agreement to the parent at the time of the advice.
It is recommended that both parents seek advice from an Accredited Family Law Specialist when considering and/or entering into a Binding Child Support Agreement as it is important that the Agreement is drafted in a way that meets with the legislative requirements and takes into account future anticipated or non-anticipated changing circumstances of the child and/or the parents, and to avoid the need to seek a Court Order to set the Agreement aside.
Binding Child Support Agreements can and should also be registered with the Child Support Agency once executed. By registering the Agreement, the parents can then elect to have the Child Support Agency facilitate the child support payments, or they can make and receive the payments privately.
The Child Support Agency
A parent can also lodge an application with the Child Support Agency for a formal assessment of child support.
There are six separate formula for the calculation of child support by the Child Support Agency, however the majority of cases will be calculated under Formula 1.
This Formula takes account of a number of factors, including:
- The cost of the child or children according to a Table set out in the legislation (go to http://www.csa.gov.au/child_support_formula/child_costs_table_2012.php for the current 2012 Tables);
- The parents' respective adjusted taxable incomes and, of all of the financial resources available to the parents combined, the percentage of each parent's income to that of the whole;
- A capped amount, which varies from year-to-year and is currently $21,622, that each parent requires to financially support him or herself;
- The amount of time the children spends with each parent (being the "care" factor);
- The "child cost percentage", being the percentage of the costs of the child that each parent meets according to the amount of time the child spends with that parent (for example, if the child lives with his or her mother 50% of the time, the mother meets 50% of the costs of the child).
Once the assessment of child support is calculated, an obligation is imposed upon one parent to pay the other parent a periodic (being weekly, fortnightly or monthly) amount of child support. This payment is calculated according to the formula and does not include specific provision for expenses such as school fees, health insurance premiums, and so on. The parents can elect to have the Child Support Agency collect the child support payments on their behalf or they can also attend to the payments directly between each other. When child support remains unpaid, the payments accrue and the paying parent is obligated to pay the arrears of child support.
Child support assessments are reviewed by the Child Support Agency upon both parents lodging their annual tax returns. Parents can apply for a change of assessment when either parent's income changes.
The Child Support Agency also offers remedies for parents who consider they are paying or receiving an incorrect amount of child support. While there are a number of factors upon which parents may object to a decision of the Child Support Agency, the most common complaint seems to relate to the paying parent having a greater income or pool of assets than that disclosed to the Child Support Agency. Being a government department, the Child Support Agency has access to the records of the Australian Taxation Office when calculating parent's taxable incomes. Unfortunately, however, this is a common issue raised when, for example, one parent receives significant "cash in hand" payments as part of their income, or perhaps within the operation of their small business that is not disclosed to the Australian Taxation Office.
Other remedies available to parents beyond the Child Support Agency include:
- lodging an application with the Social Securities Appeals Tribunal;
- appealing a decision of this Tribunal to the Federal Magistrates Court of Australia; or
- applying to the Family Court of Australia for a departure from the administrative assessment of child support calculated by the Child Support Agency.
Another issue that is often raised with respect to assessments by the Child Support Agency relates to the "care" factor, and the fact that some parents may be tempted to adjust the amount of time the other parent spends with the child or children in order to obtain a financial "advantage" (i.e receiving more or paying less child support).
It is strongly encouraged that parents resist this temptation and give priority to their child(ren)'s needs over individual financial benefits.
For more information on child support assessment, please visit the Child Support Agency website (www.csa.gov.au).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.