Lump Sum Binding Child Support Agreements

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 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 Binding Lump Sum Agreement
the lump sum amount must be more than or equal to the annual rate of child support
actual payment will be transferred between the parties (not paid to the Child Support Agency)
the lump sum credit will be recorded at the Child Support Agency 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 Child Support Agency will continue to produce administrative (formula) assessments in the usual way
Family Tax Benefit (A) entitlements will be calculated by reference to the administrative assessment of child support
because the assessment will vary with changes in the parents’ incomes, ages of the children and care levels, it will be impossible to predict how long the lump sum amount will last
when the credit is reduced to nil, it will be necessary to commence periodic payments according to the administrative assessment
a Binding Lump Sum Agreement can prescribe that the lump sum can represent either 100% or some other proportion of the amount payable under the administrative assessment

A Binding Lump Sum 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.

Example:

Parties agree to a $20,000 lump sum payment, and agree that it will represent 50% of the assessed annual rate of child support of $5,000.

A Binding Child Support Agreement is executed and registered with the Child Support Agency, and the $20,000 credit is recorded.

The payer will pay $2,500 in periodic payments, and after twelve months the credit will reduce to $17,500, which 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.