Binding vs Limited Child Support Agreements

Child Support Agreements are an ideal way for separated parents to record their agreement regarding child support. Entering into a Child Support Agreement can provide you with peace of mind and reassurance during a time of turmoil and change. It also promotes open and honest communication between separated parents.

If you and your partner have agreed to the amount of child support to be paid and how often payments are to be made, then you can make your own agreement and have it registered with the Child Support Agency, once they have approved it.

You and your partner can transfer the payments between yourselves as agreed. Or, you may wish to use the Child Support Agency’s collection services to collect child support payments on your behalf and distribute the funds accordingly.

There are two types of Child Support Agreements.

Limited Child Support Agreements

Limited Agreements are a way of recording your Agreement relating to child support. They are flexible in that they are able to be reviewed every 3 years, or when the income of the parties changes by more than 15%.

They are not as binding as the Binding Child Support Agreements. Either party is able to terminate the Agreement after 3 years by giving notice in writing.

To enter into a Limited Agreement you must:-

• first receive a child support assessment from the Child Support Agency; and
• any amounts payable under the Limited Agreement must be equal to, or more than, the payments specified in the assessment.

You are not required to obtain legal advice before entering into a Limited Agreement, as is required for a Binding Child Support Agreement.

Every three years, the Child Support Agency will provide you with an updated notional assessment. This notional assessment will contain a calculation of the minimum child support you would be eligible to receive. You can request a notional assessment at any time, in particularly where the income of either parties changes.

Where a notional assessment changes by more than 15 per cent in circumstances not considered in the agreement, the parties are able to terminate the Limited Child Support Agreement.

In any case, after 3 years, either party may end the limited agreement by notice in writing to the Child Support Agency. Alternatively, if both parties agree, a Limited Agreement can be terminated at any time or a new Agreement entered into replacing the existing one.

Binding Child Support Agreements

As its name suggests, Binding Agreements are strictly binding on the parties and can only be terminated in certain limited circumstances outlined below.

Binding Agreements are suitable for longer term arrangements. They offer a greater degree of finality and certainty to the parties. However, due to the binding nature of these types of Agreements and the limited ways they are able to be terminated, it is important that the parties make provisions for any foreseeable or unforeseeable changes that may impact on the Agreement such as unemployment or reduction of income of one or both of the parties etc.

In order to enter into a Binding Agreement, both parties must first receive independent legal advice and be issued with a statement by the lawyer confirming that the advice has been provided. The Agreement must also acknowledge that legal advice was received by the parties prior to entering into the Agreement.

Under a Binding Agreement, parents can agree to receive less child support than assessed by the Child Support Agency. Such a provision will not be binding unless the prerequisite legal advice was first received by the parties.

Binding Agreements can also provide for lump sum payments or for the transfer of assets such as property. In this case, the assets are received in the place of the more standard child support payments usually received. The Child Support Agency requires an assessment to be in place for these types of Agreements, unless an Agreement regarding the amount of child support to be paid is also made. The lump sum should be more than the assessed child support amount.

Once a Binding Agreement has been entered into, it can only be terminated with the mutual consent of the parties by either entering into:-

1. a termination agreement; or
2. a new Binding Agreement which purports to replace the existing Agreement.

A party to the Agreement may apply to the court to set aside a Binding (or Limited) Agreement. However, a court’s power to set aside such an Agreement is limited to certain circumstances, including instances of fraud, failure of either of the parties to disclose information material to the Agreement, undue influence or duress or in situations that would result in hardship to the child if the Agreement were not set aside.