Has The Effect Of COVID-19 Impacted Child Support Agreements?

As we all know, there have sadly been massive economic and social consequences because of the COVID-19 pandemic. Those consequences have impacted all of us in some way, including those of us living in the Mosman, Chatswood, St. Leonards, Northbridge and North Sydney areas.

If you entered into a Child Support Agreement prior to COVID-19, can your agreement be impacted?

In the recent decision of Martyn & Martyn [2020] FamCA 526, the Family court decided that the effects of the COVID-19 pandemic may amount to “exceptional circumstances” when considering setting aside a Binding Child Support Agreement.

How The Department Of Human Services Assesses Child Support?

The financial support of children living in Northbridge or North Sydney following the breakdown of a relationship is usually determined by an administrative assessment which relies upon a prescribed formula.  The formula is complex but is mainly determined according to the following:

  1. Your and the other parent’s incomes;
  2. The time that your child or children spend with each of you; and
  3. The age of your children.

The Department of Human Services is responsible for administering child support assessments in accordance with the Child Support (Assessment) Act 1989 (Cth). You can see the child support calculator here.

What Is A Child Support Agreement Anyway?

There is an alternative to the above. You may have heard about or have already entered into a Child Support Agreement with your former partner. Child Support Agreements allow Northbridge parents to enter into a consensual arrangement instead of relying on the administrative assessment. There are two types of Child Support Agreements available to you:

  1. Limited Child Support Agreements; and
  2. Binding Child Support Agreements.

Limited Child Support Agreements

These kinds of agreements must be registered with and accepted by the Child Support Registrar. The agreement needs to ensure that the amount of child support payable is at least the amount that would otherwise be payable under an administrative assessment. Limited Child Support Agreements can only operate for a maximum of three years, after which they can be terminated by either you or your former partner. There is no requirement for either of you to receive independent legal advice before entering into a Limited Child Support Agreement, although you should speak with us about drafting the agreement.

Binding Child Support Agreements

An alternative is to enter into a Binding Child Support Agreement (BCSA). If you decide to do this, you must receive independent legal advice prior to entering into a BCSA.  In fact, the BCSA must contain a statement by you and your former partner that you have each received independent legal advice about the advantages and disadvantages of the BCSA and its impact on your rights. Your lawyer must also sign a certificate that certifies advice has been given to you prior to you signing the BCSA and this certificate forms part of the BCSA.

The reason for formal legal advice is because of the very limited circumstances in which a BCSA can be terminated.  That’s right – if you enter into a BCSA, you are bound by its terms until your child turns 18  years of age unless a limited circumstance occurs.  Those circumstances include:

  1. You and the other parent agree to enter into a fresh BCSA;
  2. You and the other parent agree to enter into a Termination Agreement;
  3. There is a court order; or
  4. Where the parent receiving payment ceases to be an eligible carer, meaning that the care of a child drops to below 35% of the time.

The circumstances where a BCSA can be set aside by the Court occur where:

  1. The agreement was obtained by fraud, undue influence or unconscionable conduct; or
  2. Exceptional circumstances arise after the agreement is made, that means you or the other parent (the payer) is experiencing hardship.

Martyn & Martyn Case

The recent case of Martyn & Martyn gives us an example of how the economic impacts of COVID-19 can create ‘exceptional circumstances’ after parents enter into a BCSA.

The Father asked the Court to set aside a BCSA because his salary had diminished significantly, due to COVID-19. The Mother argued that the effects of the COVID-19 pandemic would pass and she should not be “cut out of the Agreement” because of the temporary hardship faced by the Father.

The Court decided that the COVID-19 pandemic did amount to exceptional circumstances and that the Father would suffer hardship if the BCSA was not set aside.

What Does This Mean For You?

If you have entered into a BCSA and you or your former partner (whoever is the ‘payer’ in the Agreement) has a significantly decreased income that will cause hardship, the Court appears to have accepted that for the purpose of setting aside a BCSA entered into prior to the pandemic, the economic effects of it can amount to “exceptional circumstances.”

However, you must remember that in this example, the effect of the pandemic on the Father’s financial circumstances was extreme, in fact leading to a reduction of sales in his company of 90 per cent.

If you or your former partner are seeking to set aside a BCSA, the hardship criteria still need to be satisfied and the Court will analyse each individual case according to its own unique circumstances. If you would like to discuss your BCSA and you are based in Northbridge or North Sydney, we are local family law experts at O’Loan Family Law.

Get in touch at (02) 8999 4364 or via email by completing the form on this page to discuss your matter in complete confidence. Alternatively, If you’d like to book an appointment straight away, head to this link.

Bron OLoan Author Bio Image

About The Author - Bron O'Loan

Bron O’Loan is the Founder & Director of O’Loan Family Law and is an expert family lawyer and independent children’s lawyer. Bron has worked in Family Law since 2015 and is an experienced litigator and skilful negotiator in all family law matters. She is also an experienced speaker and best selling author of The Splits – How to help your kids navigate separation and divorce. Click here if you’d like to learn more about Bron O’loan.

*This post is an overview only and should not be considered as legal advice. If there are any matters that you would like us to advise you on, then please contact us.

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