Child Support Agreements and COVID

There are formulae that apply in calculating the child support liability of a parent. There is a basic child support formula, but if a person has children from other relationships, is a non-parent carer, or there are other individual circumstances that apply, there will be slight amendments to the formula implemented. Rather than relying on the formula, if you are able to reach an agreement about child support arrangements, you can document that agreement either as a limited agreement or as a binding child support agreement. This article outlines each of these types of agreements and how they are affected by COVID.

Limited Agreements

You do not need to seek independent legal advice prior to entering into a Limited Child Support Agreement. However, in order to enter into a Limited Agreement, there must be a Child Support Assessment already in place, and the amount payable under the Limited Agreement must be equal to or greater than the child  support assessed by the Assessment.

Every three years a notional assessment will issue outlining how much child support you would be required to make if it were not for the Limited Agreement. You can also ask that a new notional assessment be prepared.

In the event that the notional assessment changes by more than 15% either parent may be able to end a Limited Agreement by writing. This means that if circumstances change, you may be able to end the Limited Agreement.

A Limited Child Support Agreements can be brought to an end if:

1. Both parents agree to end the agreement;
2. More than three years have passed since the existing agreement has been in place, and written notice is provided by the parent who wishes to end the agreement;
3. There are Court Orders that set aside the agreement;
4. The notional assessment varies by more than 15% of a previous assessment, in circumstances not included in the agreement, and one of the parents wants to end the agreement; or
5. A new agreement replaced the existing agreement.

Binding Child Support Agreements

1. Both parents must seek independent legal advice prior to entering into a Binding Child Support Agreement.
2. Each parent’s lawyer must provide a certificate noting that independent legal advice has been given.
3. Binding Child Support Agreements can be made for any amount that the parents are able to agree to, including amounts that are less than the notional assessment.
4. There does not have to be an existing Child Support Assessment in place in order to enter into a Binding Child Support Agreement.
5. You should be aware that a Binding Child Support Assessment can only be ended by both parents agreeing to enter into a new Binding Child Support Agreement, by a Court Order setting it aside or a terminating event occurring.

What effect does COVID have on child support agreements?

If your income has been affected by COVID and you wish to end your child support agreement, it is easier to do so if you have a limited child support agreement rather than a binding child support agreement.

The first (and least costly solution) is to consider the terms set out in the binding child support agreement.  You should look for any clauses that might set out what was intended to happen if you faced unemployment or if your income was reduced. Likewise, if you are proposing to enter into a new binding child support agreement, you should consider whether clauses covering these issues should be included in the terms of your agreement.

The court recently considered whether COVID was an “exceptional circumstance” for the purposes of s136(2)(d) of the Child Support (Assessment) Act 1989 in the matter of Martyn & Martyn [2020] FamCA 526. In this matter, the father applied to set aside a binding child support agreement after sales in his business fell by 90% as a result of the abrupt closure of international commerce. The business had suffered dramatically as its target demographic was international businesses.

To be successful, the father was required to satisfy the court that:

• There are exceptional circumstances that relate to a party to the agreement or a child in respect of whom the agreement is made;
• Those exceptional circumstances arose after the agreement was made; and
• The applicant or the child will suffer hardship if the agreement is not set aside.

The court also considered whether, as an alternative to setting aside the agreement, the agreement should be suspended, with Venson & Venson (No 2) [2010] FamCA 963 being the court’s authority to do so.

Each case is determined on its own circumstances, but in this matter, the court accepted that but for the outbreak of the COVID-19 pandemic, the father’s financial position would not be dire, and this was an exceptional circumstance and that the father would suffer hardship if the Agreement is not set aside.

When considering whether the Agreement should be suspended rather than terminated, the court declined to exercise its discretion to suspend rather than set aside the Agreement because there is an understandable absence of evidence as to the likely duration and impact of the COVID-19 pandemic on international commerce.

The court made orders terminating the agreement, but refused to discharge the arrears that had accrued up to the date of those orders.

It is therefore important, that if your circumstances have changed as a result of the COVID pandemic, or any other circumstances, that you get independent legal advice as soon as possible.

If you require legal advice or representation please contact Armstrong Legal.