The Complete Guide to binding child support agremeent in Australia
When parents separate or divorce, ensuring that their children are financially supported is a top priority. In Australia, while many parents rely on the standard child support assessment administered by Services Australia, others prefer to make their own private arrangements. One of the most formal and secure ways to do this is through a Binding Child Support Agreement (BCSA).
This comprehensive guide explores what a Binding Child Support Agreement is, how it differs from other arrangements, its benefits, the strict legal requirements involved, and how such an agreement can be terminated or set aside.
What is a Binding Child Support Agreement?
A Binding Child Support Agreement is a formal, legally enforceable written contract between parents (or eligible non-parent carers) that sets out the amount, frequency, and method of child support payments . It allows parents to step outside the standard administrative assessment formula used by the Child Support Agency and tailor an arrangement that suits their specific family circumstances.
Unlike the standard assessment, which is strictly calculated based on factors like each parent’s income, the number of children, and the percentage of care, a BCSA offers significant flexibility. Parents can agree to any amount of child support—even if it is less than what would be payable under a standard assessment .
Furthermore, a BCSA can encompass various forms of support beyond regular periodic cash payments. Parents can include provisions for non-periodic expenses, such as:
- Private school fees and tutoring costs
- Extracurricular activities (e.g., sports, music lessons)
- Private health insurance premiums and out-of-pocket medical or dental expenses (like orthodontics)
- Lump-sum payments, such as crediting the proceeds from the sale of a property towards future child support obligations .
Binding vs. Limited Child Support Agreements
In Australia, there are two types of private child support agreements: Binding Child Support Agreements and Limited Child Support Agreements. Understanding the distinction between the two is crucial for separating parents.
| Feature | Binding Child Support Agreement | Limited Child Support Agreement |
|---|---|---|
| Child Support Assessment Required? | No. Parents can enter into a BCSA without a pre-existing administrative assessment . | Yes. There must be an administrative assessment in place before making the agreement . |
| Amount of Support | Can be any amount agreed upon by the parents, including less than the assessed rate . | Must be equal to or greater than the amount calculated in the administrative assessment . |
| Independent Legal Advice | Mandatory. Both parties must obtain independent legal advice, and their lawyers must sign a Certificate of Independent Legal Advice (Section 80C Certificate) . | Not required, though it is highly recommended. |
| Inclusion of Non-Periodic/Lump Sums | Yes. Can include specific expenses like school fees, medical costs, and lump-sum transfers . | No. Typically restricted to periodic payments . |
| Duration and Termination | Intended to be long-term and final. Very difficult to change or terminate without mutual agreement or a court order . | Easier to change. Can be terminated by either parent after three years, or if the notional assessment changes by more than 15%. |
Key Benefits of a Binding Child Support Agreement
Entering into a Binding Child Support Agreement offers several advantages for parents seeking certainty and control over their financial obligations.
1. Flexibility and Customisation
A BCSA provides parents with the flexibility to design a support structure that genuinely reflects their children’s needs and their own financial capacities. Instead of a rigid formula, parents can negotiate how specific expenses—such as private schooling or significant medical costs—will be shared. This is particularly beneficial for high-income earners or families with complex financial structures .
2. Long-Term Certainty
Because a BCSA is difficult to alter or terminate unilaterally, it provides long-term financial certainty. The receiving parent knows exactly what support they will receive, allowing them to budget effectively. Conversely, the paying parent can plan their financial future knowing their exact obligations, without the risk of sudden increases due to changes in income or the standard assessment formula.
3. Finality and Reduced Conflict
A BCSA can be negotiated and finalised alongside property settlement and parenting arrangements. By resolving all financial matters comprehensively, parents can achieve finality, reducing the likelihood of ongoing disputes or the need to constantly interact with the Child Support Agency .
Strict Legal Requirements: The Section 80C Certificate
Because a Binding Child Support Agreement requires parties to contract out of their rights under the standard child support legislation, the law imposes strict requirements to ensure both parents fully understand the implications of their decision.
The most critical requirement is that both parents must obtain independent legal advice before signing the agreement. A BCSA will not be valid or legally binding unless it includes a certificate—often referred to as a Section 80C Certificate (under the Child Support (Assessment) Act 1989)—signed by the independent legal practitioner for each party .
The lawyer must certify that they have provided advice to their client regarding:
- The effect of the agreement on the party’s rights.
- The advantages and disadvantages, at the time the advice was provided, of entering into the agreement .
If this mandatory legal advice is not obtained and certified, the document is not a Binding Child Support Agreement, though it might still be considered a Limited Child Support Agreement if it meets those specific criteria .
How to Terminate or Set Aside a Binding Child Support Agreement
One of the defining features of a BCSA is its permanence. It is intentionally difficult to terminate or set aside, which provides the desired certainty but can also be a risk if circumstances change drastically.
Terminating by Mutual Agreement
The simplest way to end a BCSA is if both parents agree to do so. This can be achieved by:
- Entering into a new Binding Child Support Agreement that explicitly includes a provision terminating the previous agreement.
- Entering into a formal Termination Agreement, which simply ends the existing BCSA .
Importantly, terminating a BCSA by mutual agreement requires the same level of formality as creating one—meaning both parties must again obtain independent legal advice and have the appropriate certificates attached to the new agreement or termination agreement.
Termination Due to Change in Care
A BCSA can be administratively terminated if the parent entitled to receive child support ceases to be an “eligible carer.” Under the legislation, a person ceases to be an eligible carer if their percentage of care for the child falls below 35% [5] [7]. If this change in care continues for a specified period (usually 28 days), the Child Support Registrar must be notified, and the agreement may be terminated.
Setting Aside by Court Order (Section 136)
If one parent wishes to end the agreement but the other does not agree, the only option is to apply to the Federal Circuit and Family Court of Australia to have the agreement set aside under Section 136 of the Child Support (Assessment) Act 1989 .
The Court will only set aside a BCSA in very limited and specific circumstances. The most common grounds are:
- Fraud or Undue Influence: The agreement was obtained through fraud, duress, undue influence, or unconscionable conduct .
- Exceptional Circumstances and Hardship: This is the most frequently litigated ground. The applicant must prove that exceptional circumstances have arisen since the agreement was made, and that the applicant or the child will suffer hardship if the agreement is not set aside .
The High Bar for “Exceptional Circumstances”
The legal threshold for establishing “exceptional circumstances” is exceedingly high. The courts have determined that exceptional circumstances must be unusual, out of the ordinary, or special, and something that ought not to have been expected to occur .
A mere change in financial circumstances—such as a parent losing their job, a business downturn, or an increase in the cost of living—is generally not considered an exceptional circumstance, as these are foreseeable risks in life.
For example, in the case of Masters & Cheyne [2016], a radical shift in care arrangements from the mother having 80% care to just 2% care was deemed an exceptional circumstance. However, the court still refused to set aside the agreement because the father, despite the change, was financially well-off and would not suffer “hardship” if he continued to pay .
Conversely, in Martyn & Martyn [2020], the extreme and unforeseen impact of the COVID-19 pandemic, which caused a 90% reduction in the father’s international business sales and placed him on the brink of bankruptcy, was accepted by the Court as an exceptional circumstance that would cause severe hardship, and the agreement was set aside.
Conclusion
A Binding Child Support Agreement is a powerful legal tool that offers separating parents the flexibility to tailor financial support to their children’s specific needs, while providing long-term certainty and finality. However, because these agreements are designed to be permanent and are exceptionally difficult to break, they must be approached with caution.
The mandatory requirement for independent legal advice ensures that parents do not enter into these agreements lightly. Before signing a BCSA, it is vital to carefully consider not only your current financial situation but also what the future might hold, ensuring that the agreement includes appropriate safeguards for foreseeable changes in circumstances.
