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Unless a party is in receipt of an income tested pension, benefit or allowance (such as Centrelink) when a Child Support Assessment application is made, parties are at liberty to make their own arrangements for child support. These arrangements can be agreed between them with or without a Child Support Agreement.
A child support assessment is calculated as a percentage of the payer’s taxable income (less an amount of exempt income), which percentage increases by the number of children up to a maximum of 5 and is based on a number of factors including:-
- The number of children for whom the parent is liable to pay child support;
- The income of the payer and the payee;
- Percentage of care of children between the parents and the children’s’ ages;
- Whether the paying parent has dependant children from previous or subsequent relationships.
Parties may opt out of the Child Support system by entering into a Binding or Limited Child Support Agreement. An Agreement can provide for periodic (e.g. weekly) payments, “in kind” or non-periodic payments (e.g. private school fees, medical and dental expenses) and/or lump sum payment of credit provision for taking over payment of joint debts.
A Binding Child Support Agreement requires both parties to receive their own legal advice and can only be set aside by the Court in limited circumstances before the end of the Agreement.
Alternatively, parties can also enter into a Limited Child Support Agreement which require an administrative assessment to be in place and must be for at least the assessed annual rate. The Agreement ends after 3 years or can end if there is a 15% variation in a party’s income.