Binding Child Support Agreements can include an agreement to transfer a lump sum payment of cash or non-cash. For example, transferring equity in the former matrimonial home can constitute a lump sum child support payment. Some fundamental characteristics of lump sum binding agreements are listed below:
- an administrative assessment must be in force prior to entering the agreement;
- each party must receive legal advice from a legal practitioner, and a Certificate of Independent Legal Advice must be annexed to the lump sum Binding Child Support Agreement;
- the lump sum amount must be more than or equal to the annual rate of child support;
- actual payment of the lump sum will be transferred between the parties (not paid to the Department of Human Services – Child Support);
- the lump sum credit will be recorded at DHS-Child Support where it will reduce each year by the annual rate of child support, and the remaining credit will be indexed by the CPI;
- unless the Binding Child Support Agreement also changes the rate of child support payable, the Department will continue to produce formula assessments in the usual way;
- Family Tax Benefit (A) entitlements will be calculated by reference to the formula assessment of child support, or if the agreement has also changed the rate of child support payable, by reference to the notional assessment;
- if the rate of child support is not set by the agreement, it will be impossible to predict how long the lump sum amount will last because the assessment will vary with changes in the parents’ incomes, ages of the children and care levels;
- when the lump sum credit is reduced to nil, it will be necessary to commence periodic payments according to the administrative assessment;
- a lump sum Binding Agreement can prescribe that the lump sum can represent either 100% or some other proportion of the amount payable under the administrative assessment.
A lump sum Binding Child Support Agreement may be used in conjunction with Property Settlement orders. For example, the agreement may provide for the transfer of equity in the family home to represent a lump sum payment of child support. The parties can agree that the lump sum is to be used to pay for all or part of the child support assessment.
Parties agree to a $20,000 lump sum payment, and agree that it will represent 50% of the assessed annual rate of child support. The annual rate is currently $5,000.
A Binding Child Support Agreement is executed and registered with DHS-Child Support, and the $20,000 credit is recorded.
The payer will pay $2,500 (50% of the annual liability) in periodic payments, and after twelve months the lump sum credit will reduce by $2,500 (50% of the annual liability) to $17,500. The remaining credit will be indexed by the CPI.
This sequence will continue (taking account of any variations in the assessed rate of child support and CPI) until the lump sum is exhausted or the case ends.
The content of the Law Handbook is made available as a public service for information purposes only and should not be relied upon as a substitute for legal advice. See Disclaimer for details. For free and confidential legal advice in South Australia call 1300 366 424.