The Legal Practitioner's Guide

2.2 (b) Limited child support agreements

Limited agreements are intended to give parents some flexibility to make child support arrangements without committing themselves to a long-term agreement.

Limited agreements do not require independent legal advice before the agreement is signed. A formula assessment does need to be in place before the agreement is lodged, and the amount payable in the terms of a limited child support agreement must be for at least the amount of the existing child support formula assessment. Consideration should be given to the accuracy of this assessment before acceptance of the agreement is sought. For example, care or income details may need to be updated.

If both parents wish to end a limited child support agreement, they can do so by making a new agreement or by simply agreeing in writing to end the existing agreement. The agreement can also be terminated unilaterally by either parent if the notional assessment (which is used to calculate Family Tax Benefit and approximates the amount of child support that would be payable if the agreement had not been made, see 2.3) changes by more than 15% in circumstances not contemplated by the agreement, or at anytime after three years. If both parents are happy with the agreement in these situations, it will remain in place.

Given the relative ease of ending limited agreements, they will not generally be an appropriate mechanism for arrangements that are intended to form part of a longer term settlement. If parents do choose to make a limited agreement, they can increase the likely longevity of the agreement by addressing possible changes in circumstances in the agreement. This has two benefits:

• the agreement is less likely to be ended by one parent after three years because it is no longer appropriate for the circumstances;
• a notional assessment change of more than 15%, which would usually allow a unilateral termination, will not do so if the agreement contemplates the change in circumstances that gave rise to the change.

For example, an agreement that modifies the formula or the annual rate is more likely to remain appropriate than an agreement that sets the annual rate at a particular amount.

In addition, parents can preclude the ending of the agreement due to changes in circumstances that might otherwise result in a termination due a notional assessment change of more than 15%. For example, if parents base their agreement on a modification of the formula or include an unemployment clause, variations of more than 15% to the notional assessment as a result of changes in income or unemployment will not generally be grounds to end the agreement, because income and care changes are contemplated by the formula and unemployment is contemplated by an unemployment clause. Where the notional amount changes by more than 15% but the agreement amount does not change, this will generally indicate that the circumstances were not contemplated by the agreement.

More information on limited agreements is available in chapter 2.7.1 of The Guide: CSA Law and Policy, available at www.csa.gov.au.

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