Differences between Binding Child Support Agreements & Limited Child Support Agreements

Child Support Agreements (both limited and binding) are an integral part of the family law system and are used to set out how your child or children should be supported financially by either or both parents.

Why use Child Support Agreements?

Family law courts generally have no power to order a parent to make periodic or non-periodic payments of child support/children’s expense payments by one parent to another or a third party such as a school.

Child Support Agreements are essentially private agreements between the parties which can be used to specify, limit or reduce the amount of Child Support required to be paid by one party compared with the standard formula assessment conducted by the Child Support Agency.

More importantly, it provides the parties with input into how their children should be financially supported.

At a practical level, they can be a useful tool in negotiating Consent Orders for parenting and property arrangements with your former partner as it provides a level of financial certainty to the parents/carers of any children, about how those children will be supported financially until they reach the age of 18 or have completed their secondary education.

6 significant differences between Binding and Limited Child Support Agreements

1. Limited Child Support Agreements must already have a Child Support Assessment in place. Binding Child Support Agreements do not require an assessment in place and can be entered into with or without a Child Support Assessment.
2. The amount payable under the Limited Child Support Agreement must be equal to or greater than the amount payable under the Child Support Assessment. A Binding Child Support Agreement can range from a periodic payment of NIL to a specific amount for each child; thereby providing more flexibility to the parties.
3. Subject to point 6 below, a Limited Child Support Agreement can be ended unilaterally (without agreement) by providing notice as long as the agreement has been in place for a period of 3 years. Binding Child Support Agreements do not have this characteristic and will end upon the making of a new Binding Child Support Agreement effectively terminating or replacing the previous agreement or when the child turns 18 years of age or completes secondary school (whichever is the latter) or by a court order.
4. Limited Child Support Agreements do not require the parties to obtain independent legal advice in relation to the agreement. Binding Child Support Agreements require both parties to obtain independent legal advice and for their legal advisors to issue a Section 80C Certificate which ultimately states that you have received advice pertaining to the effect of the agreement on your rights as well as the advantages and disadvantages at the time the advice was provided. Therefore, Limited Child Support Agreements are a more cost-effective option in this aspect.
5. The terms of a Limited Child Support Agreement do not take effect unless and until it is registered by the Child Support Agency. A Binding Child Support Agreement can take effect on the day the Agreement is finalised and either party will be at liberty to register the agreement with the Child Support Registrar.
6. Limited Child Support Agreements can be terminated by either party providing 60 days’ notice if the notional assessment changes by more than 15%. Variables which affect notional assessments are the change in either party’s taxable income, change of care arrangements and the childrens’ ages. Binding Child Support Agreements do not contain this element and therefore provide greater certainty to both parties.

Both Binding and Limited Child Support Agreements have their benefits and limitations.

Which agreement is right for you will ultimately depend on your particular circumstances at the time of entering the agreement and/or any anticipated future changes you expect with your work, living circumstances or income.

Hall Payne no longer provides services in family law

If you require assistance with your family law matter, we recommend you contact the relevant Law Society in your State or Territory for a referral:

• Queensland: 1300 367 757
• NSW: 02 9926 0333
• Victoria: 03 9607 9311
• Tasmania: 03 6234 4133
• South Australia: 08 8229 0200
• Western Australia: 08 9324 8600
• Northern Territory: 08 8981 5104
• ACT: 02 6274 0300