If you are separating from your spouse, and assuming the primary role of looking after your kids, then one of the most important issues you need to understand is how child support works.
At its most basic level, the purpose of child support is to protect your kids from the economic impact of your separation. Child support can take the form of either a recurring and/or lump sum payment of money from one parent (the Payer) to the other (the Payee).
A frequent disagreement between separated parties is whether the Payer is obliged to continue to contribute towards ‘discretionary’ things like private school fees, private medical cover and family holidays.
The Agency and the Assessment
You have the option of simply ‘agreeing’ a basis of child support informally with your ex-partner. But if this is not possible (and it often isn’t, for obvious reasons), then you will need to work through the more complex assessment formula used by the Department of Human Services – Child Support Agency (the Agency).
The Agency determines what child support is due (the Assessment) using a formula set by the Child Support (Assessment) Act 1989 (the Assessment Act). In our experience, liaising directly with the Agency to get and enforce an Assessment can turn into a frustrating and tedious experience for both parties.
Importantly, for the parent getting the support, the Assessed support is ‘capped’ for assessable incomes over $187,785 (as at 1 July 2019). This means that the amount of child support you receive does not get bigger once your ex-partner earns more than $187,788 – for example, even if they were earning over $1,000,000!
Further, as a general rule, the Agency will not force a paying parent to provide additional child support, for such things as private school fees, private medical cover or family holidays. The fact that your former spouse is wealthy does not mean that they will be required to maintain your children in the ‘luxury’ they may have grown accustom to.
Take for example private school fees. These can range from anywhere between $18,000 to $50,000 per annum, meaning a significant ‘gap’ can exist between what you receive in child support payments via an Assessment by the Agency, and your children’s actual living expenses.
Child Support Agreements
You may not be the only person concerned about maintaining your children’s lifestyle. Your partner may also agree that providing more for your children is a fair and equitable thing to do – voluntarily.
If this is the case, you and your former partner can address the ‘gap’ by entering into a child support agreement (a CSA). There are two types of CSAs:
- Limited Child Support Agreements (Limited CSAs); and
- Binding Child Support Agreements (Binding CSAs).
A Limited CSA can include ongoing (periodic) payments of child support and can also include child support payments ‘in kind’ (i.e. assets or the payment of expense directly, rather than cash transfers to the other spouse). This could include the payment of private school fees, ongoing maintenance of the family health insurance policy, and any ‘gap’ medical and dental expenses.
A Limited CSA requires an Assessment to be in place at the time the Limited CSA is entered into. Couples are also required to lodge their Limited CSA with the Agency.
A Limited CSA will end if:
- A Court makes different orders regarding child support;
- You agree with your ex-partner to make and sign a new CSA;
- The ‘notional’ assessment of child support made by the Agency changes by more than 15%; or
- One of you provides the other notice in writing that they wish to end the agreement (after a period of no less than three years).
If you are taking on the role of primary care, then a Binding CSA is often your best option.
A Binding CSA is intended to allow parents the freedom and flexibility to make different arrangements regarding child support, while also providing a high level of legal certainty and finality.
As with Limited CSAs, a Binding CSA must be in writing and signed by both parents. However, both you and your ex-partner must both seek independent legal advice before entering into (or ending) a Binding CSA.
A Binding CSA can be for any amount of ongoing child support you agree and can also include lump sum payments (including the transfer of property).
A Binding CSA can only end when a new Binding CSA is made, or if a Court makes orders concerning the amount of child support payable. The criteria for a court to set aside a Binding CSA are strict, and it is therefore a hard thing to do. The Family Court has the ultimate discretion to set aside a Binding CSA and may only do so in the case of fraud, unconscionable conduct, material non-disclosure or where exceptional circumstances exist.
Obviously, there are both advantages and disadvantages to private child support agreements, depending on your circumstances and what you hope to achieve by entering into one.
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