Separation is seldom an easy process and working through the best outcome for everyone is important, especially when children are part of the picture. One of the many challenges couples face when deciding to split is the ongoing support of their kids.
Most parents rightly make this their priority, however sometimes the circumstances can be complicated, and it can be hard deciding on the best option for the whole family.
If the financial arrangements for your children become significantly impacted following a separation (divorce or otherwise), it may be best to enter into a private child support agreement, ensuring expenses will be met and your kids are properly looked after.
The most critical factor here is always the welfare and rights of the children. It’s also important to strike a fair deal and find the best outcome for you and your financial situation.
How to divide child expenses upon separation
In Australia, the government’s Child Support Registrar uses a formula to determine the standard rate of child support that is payable for a child based on:
- the income of the respective parents; and,
- the number of nights the paying parent spends with the child.
The Department of Human Services provides a useful online calculator that estimates the rate of child support by applying the formula to a particular set of circumstances.
The calculator has its limits, however, as there may well be other expenses that a parent pays or contributes towards, such as:
- private school fees;
- private health insurance premiums;
- day/child care; and,
- extra-curricular activities.
These are not automatically credited towards a government assessment, meaning a parent could end up paying well over the assessed amount of child support.
If this matches your circumstances, then our recommendation is that the parents enter into a private Child Support Agreement. These are legal agreements between the two parents that will allow for a greater consideration of the wider circumstances and help to reach the fairest arrangement possible.
What is a private Child Support Agreement?
There are actually two types of private Child Support Agreements in Australia, and the differences between them are significant.
One is a Binding Child Support Agreement and the other is a Limited Child Support Agreement.
The names don’t make overly clear exactly what each entail and which might suit your situation best. Therefore, seeking trusted legal advice is important before you enter into an agreement.
A Family lawyer will also be able to help you work out which type of Agreement will provide the best set up for you and your children. They will also guide you in understanding the terms and financial impacts.
Binding Child Support Agreement
The Binding agreement is the stricter of the two, as it remains in place until the child turns 18, unless otherwise stated in the agreement. It can’t be terminated early unless a new agreement replaces it, or a Court sets it aside.
It’s a binding and enforceable contract between the parents that outlines how the two parties will cover the specific costs. 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.
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.
If you’re considering a Binding agreement for child support, it’s important to keep in mind that the following conditions need to be met in order for it to be valid:
- 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,
- that it includes 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.
As you can see, the need for independent legal advice to be sought is essential, and it does mean this option costs more. However, having a professional to guide you will also make the process easier, simpler and less stressful.
At Nolan we understand how complex these matters can be, and we work alongside you to simplify it all and ensure that you and your family get the best outcome. Get in touch for a free initial consultation with us.
Limited Child Support Agreement
The main difference here is that the Agreement can be ended by one of the parents after 3 years, or if their financial circumstances change by more the 15% of the government assessment (the one done by the Human Services calculator). Hence the name ‘Limited’.
The Limited agreement may be best suited to your circumstances, as provides parents peace of mind if they are unsure of their financial futures and do not want to be tied to a Binding Financial Agreement (which can’t be cancelled).
The drawback, however, is that this would bring the parents back to the question of how to financially support their children, whereas a Binding agreement is set until their adulthood.
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 Financial Agreement, the Limited Child Support Agreement does not require the parents to obtain independent legal advice which can reduce the costs associated with this type of agreement. This said, we still recommend you seek professional advice from a Family lawyer first, as understanding the terms before signing is crucial.
Family lawyers can also guide you in how to write up a child support agreement.
We want to help you find the best outcome for you and your child. If you believe you are entitled to child support or if you would like to understand your child support obligations, reach out to us today.