The Legal Practitioner's Guide

5.2 Suggested draft terms

5.2 (a) Lump sum payments

Court order

• That pursuant to section 123A of the Child Support (Assessment) Act 1989 [Parent A's name] provide child support to [Parent B's name] for the child(ren) [child(ren)'s names] by way of a lump sum payment of $x. This amount is to be credited against the administrative assessment(s) of child support.

• From [start date], the lump sum child support is to be credited as [x% (100% or some other specified percentage)] of the annual rate of child support payable, until the lump sum is exhausted.

Child support agreement (binding)

• [Parent A's name] and [Parent B's name] agree that [Parent A's name] will provide child support to [Parent B's name] for the child(ren) [child(ren)'s name(s)] by way of lump sum payment of $x. This amount is to be credited against the administrative assessment(s) of child support.

• From [start date], the lump sum child support is to be credited as [x% (100% or some other specified percentage)] of the annual rate of child support payable, until the lump sum is exhausted.

Tips and problems

Credit clauses
Lump sum orders must, and agreements may, specify the percentage of the administrative assessment that the lump sum is to be credited against (sections 123A(3)(b) and 84(8)). Note: If no percentage is specified in an agreement the lump sum will be credited at 100% of the amounts payable.

The amount to be credited against the child support assessment cannot reduce the assessment below nil (section 69A(2)(b) of Registration & Collection Act). On or after 1 July each calendar year, the remaining lump sum amount will be indexed with a CPI factor (section 69A(5)).

Note: at the end of a liability (for example, the child turns 18) any 'unused' lump sum amount is not a credit and CSA cannot refund that amount. This is because CSA is not holding actual money, rather it is an accounting record of the transaction. The parties may wish to include a clause to address this possible eventuality in their order or agreement. Also, if an unforseen change in circumstances occurred, for example the child/ren left the former payee's care and went to the former payer's sole care before the lump sum was exhausted, the Assessment Act does not make provision for a repayment or adjustment of the lump sum. Practitioners would have to make specific provision in the binding agreement to enable civil recovery and to examine the possibility of encumbering an asset by charge or caveat where the lump sum arose from adjustment of equity in the former matrimonial home.

Collecting the lump sum payment
CSA can only register periodic amounts of child support for collection. The payee must make his or her own arrangements to enforce payment of any lump sum amount that the payer is required to pay under a court order or agreement (sections 95(3) and 141). In order to do this they must first register the agreement in a court with jurisdiction under the Assessment Act. However, if CSA has not been notified that the lump sum has been transferred in accordance with the agreement, CSA will not credit the periodic liability against the lump sum (section 69A(1) (b), of the Registration and Collection Act).

Registering an agreement in a court with Assessment Act jurisdiction
Sections 98 and 136 of the Assessment Act allow for registration of a child support agreement in a court with jurisdiction under the Act. Registration is a prerequisite for the court to enforce the terms of the agreement, or to consider an application to set aside an agreement. Chapter 23 of the Family Law Rules 2004 deals with registration of documents. Rule 23.01 allows for the registration of a child support agreement by filing an affidavit with a copy of the agreement attached.

When does the reduction take effect?
Section 69A of the Registration and Collection Act states that the Registrar will give effect to provisions crediting the lump sum payment when an agreement has been accepted or order made, and notification has been received that the lump sum payment has been paid in accordance with the agreement or order.

When the payee receives Family Tax Benefit
Generally, where the payee receives Family Tax Benefit (Part A) (FTB) at more than the base rate, and the parents make an agreement about the child support to be paid, then the payee's FTB will be assessed on the notional amount of child support that would have been paid if the agreement had not been made (see chapter 2.3 above). However, where the only function of the agreement is to specify that a lump sum is to be used as a credit for child support, this does not apply. As the parents will continue to be assessed administratively to determine the rate of child support payable (and the lump sum is used as a credit to pay this rate), there is no need to create a notional assessment. FTB entitlement will be assessed on the child support paid, including the amount credited against the lump sum.

The court must consider social security implications before it makes the order (section 123A). The Family Assistance Office can advise the payee how lump sum child support will affect his or her Family Tax Benefit entitlement. More information is available from or 136 150 or www.familyassist.gov.au.

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