The Legal Practitioner's Guide
5. Departure orders or agreements that provide for a lump sum or payments to third parties
5.1 Summary
The Assessment Act provides that CSA may only make an administrative assessment or an administrative departure (Part 6A) that provides for periodic payments of child support. However, a court may make orders for the provision of child support other than by way of periodic payments. Parents can also make a child support agreement to achieve the same result. There are significant legislative changes to these matters from 1 July 2008.
5.1 (a) Court departure orders
Part 7, Division 5 of the Assessment Act provides that parents with a child support assessment in force can apply to a court for an order requiring the payer to provide child support in the form of a lump sum or payments to third parties (section 123). The court can make an order of this type if it would be just, equitable and otherwise proper to do so (sections 123A or 124).
New lump sum provisions operate in a different way from provisions relating to non-periodic payments prior to 1 July 2008. (Non-periodic payment provisions continue to be available after 1 July 2008.) Lump sum provisions set up a payment made to the other parent as a "credit balance" to be used to meet ongoing liabilities under section 69A of the Registration and Collection Act, rather than reducing these liabilities under the Assessment Act as non-periodic payments may do. Details on the working of lump sum provisions are as set out below for child support agreements.
Where a court makes an order for child support to be used as a credit to meet ongoing liabilities, it must specify the percentage of these liabilities to be met by drawing on the lump sum.
Where the court makes an order for non-periodic payments, it must state whether or not these will reduce the annual rate of child support payable. Where the order is silent on whether the payments are to reduce the annual rate, CSA will treat the payments as additional to the assessed annual rate. Where the non-periodic payments will reduce the annual rate, the order must specify the reduction by either a percentage or dollar value amount (section 125).
5.1 (b) Child support agreements
A binding child support agreement can make provision for a parent to provide child support by way of a lump sum (section 84(1)(e), Assessment Act):
- payments made under lump sum payment provisions are credited against the liability of a party to the agreement, rather than reducing the annual rate of child support payable (section 69A of Registration & Collection Act);
- for this type of binding agreement only, an administrative assessment must be in force prior to the application for acceptance being made (subsection 84(7), Assessment Act). The amount of the lump sum must be specified in the agreement and equal or exceed the annual rate of child support in value;
- the administrative assessment to determine the annual rate of child support will be calculated as normal (unless parents also make an agreement about the amount of child support to be paid, see chapter 2);
- if the parents agree to use the lump sum to meet some of the ongoing liability and also to transfer some cash payments, the agreement may specify a percentage rate at which the lump sum will be credited against the annual rate of child support payable (section 84(8));
- at the end of each year, the credit used will be deducted from the lump sum, and the remaining amount indexed by the CPI. Once the lump sum credit has been reduced to zero, child support payments will resume in order to continue to meet the ongoing liability.
Separate to these provisions, binding or limited child support agreements can make provision for non-periodic payments or payments to third parties, such as school fees (section 84(1)(d)). The agreement must specify whether the non-periodic payments will reduce the annual rate of child support payable (section 84(6)) and, if so, by either a percentage or dollar value amount. If there is no specified value or amount by which the payments are to reduce the annual rate of child support, the non-periodic amount will be treated as being additional to the assessed annual rate.
Note: non-periodic payment provisions are taken to have effect as if they were a statement made by a court under section 125 in an order made under section 124 (see section 95(3)).