The new Child Support Scheme

The new Child Support Scheme and changes to Family Assistance

Parents who make private agreements for ongoing child support or lump sum payments will have better protection and greater flexibility.

In this section:

• What is a binding agreement?
• What is a limited agreement?
• Agreements for lump sum payments
• Making direct payments
• How do agreements affect Family Tax Benefit?
• If you have an existing agreement
• If you want to end an agreement
• If you need help with your agreement

Under the current Scheme, once the Child Support Agency accepts a written agreement between both parents there is no requirement to update the agreement amount. This means that over time, due to changing circumstances, the agreement may be less than would be payable were the agreement not in place. In addition, current rules make it difficult for parents to make agreements for less child support than their formula-based child support assessment would be.

Under the new Scheme, the process for parents who want to make agreements will be improved. There will be better protection for parents who want to make long-term agreements and it will be easier to make shorter term agreements. Parents who agree to less child support than the formula amount will be able to, as long as they get legal advice. There will also be increased flexibility for parents who wish to make a lump sum agreement and make direct payments.

There will be two types of agreements:

• binding agreements
• limited agreements

What is a binding agreement?

Binding agreements are formal agreements that:

• are in writing and signed by both parents
• are made after the parents have obtained independent legal advice to enter or end the agreement
• include a certificate from each parent's lawyer stating they have provided the parent with independent legal advice
• can be made for any amount that both parents agree is appropriate in their circumstances, including amounts that are less than the formula amount
• can only be ended by a new binding agreement or a court order setting aside the agreement.

 Important information for people receiving family assistance

If you receive Family Tax Benefit Part A (see more information) the amount of Family Tax Benefit Part A you receive is based on the Child Support Agency's assessment using the child support formula. This is called a CSA notional assessment.

 Important information for people receiving family assistance

The CSA notional assessment is updated every three years, or if the amount of child support payable under the agreement changes by more than 15 per cent. This ensures the Family Tax Benefit Part A payable takes into account parents' changing circumstances.

What is a limited agreement?

Limited agreements have the following differences to binding agreements:

• parents do not need to seek legal advice before entering into them
• there must be a formula assessment already in place
• amounts payable under the agreement must be equal to or greater than the child support assessed by the formula.

A new CSA notional assessment will be made every three years (or whenever either parent asks for one) to make sure parents know how much child support would have been payable if the agreement was not in place.

If the CSA notional assessment changes by more than 15 per cent, either parent may be able to end the agreement by writing to CSA. This means parents can end agreements if their circumstances change in ways that weren't covered by the agreement.

Agreements for lump sum payments

Binding agreements can include lump sum payments (including transfer of property) to be credited as child support instead of monthly cash or electronic payments. Parents don't have to agree to the amount of child support to be paid; the Child Support Agency will make assessments as usual.

For these types of agreements, there must be a formula assessment in place and the lump sum must be equal to or greater than the annual child support rate under that assessment.

If the lump sum payment is greater than the annual child support rate, the difference will be used as credit for future child support payments. Parents will be able to nominate a percentage, or all, of the upcoming child support payments that are to be met using the credit. The lump sum amount will be reduced at the end of each financial year according to the amount that was owed for that year. Any remaining amount will be indexed annually.

 Important information for people receiving family assistance

Because parents are not making an agreement about the amount of child support, their Family Tax Benefit Part A will be based on the assessment amount as normal.

Making direct payments

You don't have to have a formal agreement to make direct, third party or prescribed payments, or if you decide to transfer child support arrangements between yourselves.

If both parents agree a direct payment was made in lieu of child support

Direct payments (often referred to as non-agency payments) are payments such as cash, clothes, transfer of property rights, or providing a service such as lawn mowing or bookkeeping. Third party payments are payments made to parties on behalf of the other parent. Examples include payments for a holiday, sports and recreation, music and dance lessons.

If parents don't agree about a direct payment

Prescribed payments are certain payments that can be credited as child support even if the parent receiving child support doesn't agree that the payment was in lieu of child support. As long as the paying parent pays 70 per cent of their normal monthly child support payment on time, a maximum of 30 per cent of the monthly payment can be credited.

Prescribed payments can be for child care costs, school fees, school uniform and book fees, essential medical and dental items, the other parent's share of rent, mortgage, utilities and rates, or some motor vehicle costs.

From 1 July 2008, CSA will credit prescribed payments if the paying parent has less than 14 per cent (regular) care. This is because if you have more than 14 per cent care, the direct costs you incur when you care for the children are recognised in the new formula.

If both parents agree the prescribed payment was made for the purpose of child support, then the payment can be credited regardless of your level of care. See more information about care and direct costs.

For more information about direct and prescribed payments go to the CSA website (for paying parents and receiving parents)

How do agreements affect Family Tax Benefit?

 Important information for people receiving family assistance

From 1 July 2008, regardless of your agreement, your Family Tax Benefit Part A will be calculated according to the Child Support Agency (CSA) notional assessment. This ensures the government's contribution to the cost of raising children through Family Tax Benefit Part A does not replace parents' contribution because they agreed to exchange less child support.

If CSA collects your payments and the entire amount agreed is not collected, Centrelink will use the notional amount paid to assess your Family Tax Benefit Part A entitlement. Centrelink calculates the percentage collected by CSA and applies the percentage to the child support that you would have received except for the agreement to work out your Family Tax Benefit Part A payments.

For example, if CSA collects 50 per cent of the agreed amount of child support, then only 50 per cent of the CSA notional assessment, will affect your Family Tax Benefit rate.

If you don't receive the full amount of child support you are entitled to during the financial year, Centrelink will keep a record of the underpaid amount and treat any additional amount of child support you may receive in future years as though it was paid in the year the under payment occurred.

If you have an existing agreement

The current Child Support Scheme will continue to apply to private agreements accepted by the Child Support Agency (CSA) before 1 July 2008. This means that notional assessments will not apply to these agreements, and the same rules for replacing or ending agreements will apply as they currently do.

CSA will review every child support agreement in place and contact you to discuss the effect of the new Scheme on your agreement. Some agreements will need to change, and others won't have to—if you are affected we'll contact you.

 Important information for people receiving family assistance

If your agreement cannot continue after 30 June 2008 because it's incompatible with the new formula, it will end on 30 June 2008. You might like to talk to the other parent about making a new agreement. This may also affect your Family Tax Benefit Part A.

 Important information for people receiving family assistance

If your agreement doesn't end, it will continue to be binding as it is under the current Scheme. Some changes may be made to allow the agreement to continue, and we will discuss this with both parents. If you don't agree with a decision about your child support, find out how to object. Your Family Tax Benefit Part A will continue to be worked out based on the value of your child support agreement.

If you want to end an agreement

Ending an existing agreement
If you currently have an agreement and want to end it, the current rules still apply and will continue to apply after 1 July 2008 if the agreement continues past then.

So, your agreement will continue until the end date of the agreement or:

• when the child turns 18 or
• parents make a new limited or binding agreement or
• a court sets the agreement aside.

Ending a binding agreement
Under the new Scheme, both parents will need legal advice before ending a binding agreement. Binding agreements can only be ended with a new binding agreement, a termination agreement, or a court order that sets aside the agreement. Courts will only be able to set aside agreements in limited circumstances—so it's very important to ensure the agreement reflects possible changes to your circumstances, like changing jobs or changing care arrangements for the children.

Ending a limited agreement
Parents can end a limited agreement if:

• both parents agree to end the agreement
• more than three years has passed with the existing agreement in place, and written notice is provided by the parent who wants to end it
• there is a court order that sets aside the agreement
• the CSA notional assessment varies by more than 15 per cent from the previous CSA assessment, in circumstances not included in the agreement, and one of the parents wants to end it
• a new agreement, binding or limited, replaces the existing agreement.

If you need help with your agreement

CSA cannot draw up agreements, but a child support agreement form and a fact sheet are available on the CSA website.

You can use this form as a guide to help you draw up an agreement, or ask for help from a solicitor or Legal Aid.

You can also call the Family Relationship Advice Line on 1800 050 321 for help and information.

You can also get help from a mediation service, which can help parents sort out issues about children, money and property. To find a service near you, go to the Community Services Directory on the CSA website.