By Carlos Turini – Family Law Specialist
On occasions, the parents of a child prefer to come to an agreement regarding child support which is outside the formula which exists under the Child Support (Assessment) Act 1989 (“the Act”). Both parents may prefer to work ‘outside the square’ as it suits them both to have an arrangement which is outside the formula. The agreement may be formalised legally and lodged with the child Support Agency (“the Agency”) under Part 6 and 7 of the Act. The agreement would then be binding upon the parties.
A private child support agreement may be appropriate, for example in one of the following cases:
- If the child attends a private school and the parents agree to share on the school fees;
- If the child is likely to require expensive orthodontic work;
- If, as part of a family law property settlement, one parent pays a lump sum amount of child support or transfer’s a property in lieu of child support.
Formalities
For a child support agreement to be binding under the Act it must comply with a number of requirements. Each party must obtain independent legal advice and each solicitor must complete and sign a certificate of legal advice which must be attached to the agreement.
Private school fees, medical and dental expenses as part of child support agreement
Both the party who has an obligation to pay child support (“the payer”) and the party entitled to receive child support (“the payee”) may be happy to enter into a private child support agreement outside the formula.
Lump sum child support and transfer of real property in lieu of child support
Sometimes, parties have a long term commitment that their child will attend or continue to attend a private school. The school fees may be substantial, often greater than the periodic payments which would be required under the formula. The parties may agree, and formalize the agreement legally, to provide that both parties will share the school fees and the obligation of the parent to make periodic payments be reduced or cancel altogether.
The parties may have a commitment that the child will receive the best medical and dental care and they enter into a private agreement to make provision for such expenses to be shared and for the periodic payments required to be reduced or cancelled.
Private child support agreements provide a large degree of flexibility to parties negotiating a settlement to separate their assets. A party entitled to receive child support may instead retain an asset including an investment, shares or real property in lieu of future child support for a number of years.
As an example, the payee may be a parent only working part time and having the primary care of the children. Both parents may wish for the children to continue to live in the former matrimonial home rather than the primary carer and children having to move to accommodation of an inferior quality. However, the payee would be unable to pay the other party a sum of money representing his/her share to the title to the property. The parties may agree that child support payments for the children for the next five years would be equivalent to the value of the payer’s share to the property. A private child support agreement could provide that the payer will transfer title to the house to the payee in lieu of child support payments for five years.
Approval by Agency
Importantly, such an agreement would need to be approved by the Registrar of the Child Support Agency. The Registrar may refuse registration if the agreement is considered to be less beneficial to the payee than if he/she continued to receive periodic payments pursuant to an assessment.
The parties may choose not to ledge a private agreement for registration. However, the payee must take care to ensure that a private child support agreement will not affect his/her Centrelink entitlements if not approved.
For more information please contact:
Carlos Turini at: cturini@elringtons.com.au or call Carlos on: 02 6206 1300
