New Child Support (Assessment) Act amendments permit administrative termination of binding child support agreements where care arrangements reverse or reduce

28 August 2018
Rose Lockie, Partner, Melbourne

Recent amendments to the Child Support (Assessment) Act 1989 (Cth) (“the Act”) have simplified the way that binding child support agreements can be terminated in certain circumstances.

It is no longer necessary for a party paying child support under a child support agreement to apply to the court to terminate the agreement where circumstances have changed such that the party receiving child support has less than 35% care of the child. An administrative process is now available.


What is a binding child support agreement?

The Act allows eligible parents and carers to voluntarily enter into a written binding child support agreement as an alternative to a formula assessment of child support.

A child support agreement registered under the Act typically alters a party’s child support obligations which would otherwise be assessed by the Child Support Registrar. There are two types of child support agreements recognised under the Act, binding agreements and limited agreements.

A binding child support agreement is a written agreement signed by both parties where each has obtained independent legal advice. The requirements for a binding child support agreement are outlined in section 80C of the Act. The Act specifies that a party receiving child support under a child support agreement must have care of the child at least 35% of the time.

A limited child support agreement is an agreement where the parties have not obtained legal advice and is subject to different rules (see section 80E).


Terminating a binding child support agreement

Ordinarily, a binding child support agreement cannot be varied after it has been entered into other than by agreement between the parties. The Act allows parties to enter into a new agreement in order to vary their previous obligations or to terminate a binding child support agreement.

The new and expanded mechanisms for terminating a binding child support agreement are:

  • Through the creation, by both parents, of a new child support agreement which expressly negates the operation of the earlier agreement;
  • Through a “termination agreement” entered into between both parents;
  • By way of a court order; or
  • On notifying the Registrar that the party receiving child support is no longer an “eligible carer” (see below).

The amendments intend to make it easier for binding child support agreements to be terminated where the child’s care arrangements change. The new section 80D(2A) of the Act permits the Child Support Registrar to terminate a binding child support agreement where the party receiving child support ceases to be an “eligible carer”.

The result of this amendment is that the Registrar can now administratively terminate a binding child support agreement (without the need for a court order) where:

  • The party receiving child support (the payee) begins to have less than 35% care of the child; and
  • The period in which the payee has less than 35% care of the child is at least 28 days; and
  • The child support agreement has not been suspended (either by virtue of a provision in the agreement itself, notification to the Registrar, or a decision of the Registrar); and
  • The payee would otherwise continue to be entitled to child support in accordance with the child support agreement.

The effect of the amendments is that the paying party does not need to make an application to the court to have a binding child support agreement terminated where the child’s care arrangements change and the payee has less than 35% care of the child. They do need to notify the Child Support Registrar of the change in circumstances and provide adequate information to verify the changed circumstances.

These amendments apply to new binding child support agreements made after 1 July 2018 and to agreements made before 1 July 2018 where there is a change in care arrangements after 1 July 2018.

These amendments are a logical extension to the existing powers of the Registrar to vary formula assessments when satisfied that an ongoing change of care has occurred.


The position prior to the amendments

Prior to the amendments, binding child support agreements could only be terminated by a written agreement between the parties (fairly rare in practice), or by a court order (difficult to obtain, time consuming and very rare in practice).

To obtain a court order, the party seeking to terminate the agreement must establish the following criteria:

  • Exceptional circumstances exist relating to a party to the agreement or the child;
  • Those exceptional circumstances arose since the agreement was made; and
  • The applicant or the child will suffer hardship if the agreement is not set aside.

Even where the above criteria are established, the court has discretion as to whether to terminate the agreement or not.

The Family Court has applied the above criteria strictly. In Masters & Cheyne (2016) FLC 98-072, the Full Court comprised of Murphy, Aldridge and Austin JJ delivered separate judgments dealing with the termination of a binding child support agreement where the subject child had commenced living with the father who was liable to pay child support to the mother (who had moved interstate). The judge at first instance had found that the change in the child’s care arrangements was one factor which led to her decision that there were “exceptional circumstances” and that the unjust nature of the agreement in light of those changes was sufficient to establish “hardship”. On appeal to the Full Court, Murphy and Austin JJ separately concluded that “exceptional circumstances” had been established but “hardship” had not been established. Aldridge J found that neither element had been established. The result was that the primary judge’s decision was overturned, despite the fact that the mother was living interstate and no longer had care of the subject child.

Although the recent amendments remove the need for a party to apply to the court to terminate a binding child support agreement where the party receiving child support has less than 35% care of the child, there will still be other circumstances where an application to the court will be necessary. In those cases, the above three elements must be established for the court to exercise its discretion to terminate the agreement.

Care arrangements can vary widely between families and within families over time. Legal advice must be sought in relation to a parent or carer’s particular circumstances.

Please make contact with our Family and Relationship Law Team if we can assist with advice about child support and other financial issues upon family breakdown.

Authored by:
Paul Lewis, Partner
Carolina Arricobene, Lawyer

This update does not constitute legal advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of the content.

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