Children’s expenses: to bind or not to bind?
School fees, swimming lessons, uniforms, football and dance classes, the list of the ever increasing expenses of raising children goes on. When parents separate, expenses that were once agreed and were paid from joint funds can become a point of contention.
On a strict interpretation of the family law system, a parents’ financial obligation towards their child’s expenses is child support as assessed by Services Australia, no more and no less. However, in reality this sometimes nominal amount would cover only a small portion of the real expenses of raising and caring for children.
An administrative assessment of child support via Services Australia can involve regular variations to a child support obligation. The formula applied by Services Australia assesses the cost of children based on the combined income of the parents, and then distributes this cost between the parents based on their respective shares of that combined income and the time the children spend with each of them. Usually, if one parent has greater income than the other, they are generally assessed to provide some of their income to the other parent in the form of child support.
There are however a number of options available to separated parents in determining their child support arrangements. They can of course simply rely on an administrative assessment via Services Australia. They could alternatively reach an informal agreement between them as to who will pay what when it comes to their children’s expenses. Or they may decide to enter into a formal Child Support Agreement.
There are 2 types of Child Support Agreements, being Binding Child Support Agreements, or Limited Child Support Agreements.
Limited Child Support Agreements are not particularly common. Given the relative ease of ending Limited Agreements, and the potential for them to expire, they are not generally considered by separated parents in circumstances where those parents want the child support arrangements to be long term and binding.
A Binding Child Support Agreement is exactly as its name suggests, binding, and it generally operates on a long term basis. However, given the binding nature, it can also be quite difficult to get out of such an agreement if a parent’s circumstances change. Binding Child Support Agreements are far more commonplace than Limited Child Support Agreements.
In order to enter into a Binding Child Support Agreement, both parties must have received independent legal advice before the agreement is signed, and both legal representatives must also sign onto the agreement to confirm the necessary advice has been provided to their client.
The terms of a Binding Child Support Agreement could be more or less favourable than an assessment via Services Australia, or it could incorporate both an ongoing assessment via Services Australia, along with provisions for payment of various other expenses for the children.
Binding Child Support Agreements can address an ongoing specified payment or administrative assessment of child support, otherwise known as periodic child support, along with payment of other specified expenses, known as non-periodic child support.
Expenses for children such as their school fees, the cost of books and uniforms, camps, medical and dental costs and fees and equipment associated with the children’s extracurricular activities are all examples of common non-periodic child support often covered by a Binding Child Support Agreement.
Some parents, particularly those who may be reliant upon Centrelink benefits, may prefer to obtain an administrative assessment from Services Australia to ensure that their child support obligations are regularly assessed based on their current circumstances. Some parents are unable to reach agreement about child support, and for them an administrative assessment is the only viable option. Other parents prefer to make their own arrangements, and that is where Child Support Agreements can become the best way to formalise those arrangements.
Like anything, there are of course risks and benefits associated with entering into a Child Support Agreement. You should obtain advice from an experienced family lawyer in relation to your specific circumstances before you decide on the best child support arrangements for you and your family.
Our Family Law team can prepare Child Support Agreements and also provide advice in relation to Child Support Agreements along with assisting with all other aspects of your family law matter. Please contact us if you would like advice specific to your personal circumstances.
Tara Paatsch
Principal Lawyer
M 0412 660 842 | T 03 5225 5254
E tpaatsch@ha.legal
Bridgette Kelly
Principal
M 0438 714 965 | T 03 5225 5275
E bkelly@ha.legal
