CHILD SUPPORT: ARE THERE OPTIONS AND ARE THEY BETTER?

The usual means by which non-custodial parents financially support their children following separation is by way of periodic and non-periodic payments of child support through the Child Support Agency.

The angst this may cause can be substantial, especially when the payer receives regular telephone calls from the Child Support Agency demanding up to date financial information and confirmation of existing living arrangements for the children.

That same angst can also be experienced by payees, who become frustrated by the Agency’s dinosaur-like speed at which they chase up arrears or outstanding financial information from their former partner.

If 2 separated parties are on reasonable terms and do not wish to have the Agency involved in their child support issues, there are important options available to them that can take the uncertainty and animosity out of the equation, as well as being tax effective.

Parties can enter into a Binding Child Support Agreement which can:

1. set particular rates of periodic cash support (weekly, monthly or annual),
2. deal with issues such as payment of:
   1. school fees,
   2. school uniforms,
   3. computers and stationery,
   4. sports uniforms and equipment,
   5. tutoring,
   6. sports fees,
   7. OHSC and childcare fees,
   8. private health insurance premiums and gap payments, and
   9. other medical expenses.

This option does not have any tax benefits but allows for certainty for the future.

Parties can also look at establishing a Child Maintenance Trust (CMT).

This type of trust is set up to provide support for children where a parent has an obligation to provide child support and income derived from assets within the trust and distributed to the children satisfies this obligation.

There are strict conditions that apply to establishing a CMT, including:

1. Parents must be separated,
2. Parents must agree upon the terms of the Trust,
3. The assets of the Trust are to be beneficially owned by the children,
4. The payer must at least earn $80,000.00, and
5. The initial property of the Trust must have a value of at least $200,000.00.

Payment of child support through a CMT has significant tax benefits to the payer as it allows for income that is derived from the assets of the CMT to be treated as income of the child or children, taxed at normal rates..

Advisors should bear these options in mind when discussing child support obligations with their clients. If you or your clients require further information regarding these alternative ways of dealing with ongoing child support issues please contact us at Clelands Lawyers in Adelaide.

Ben Farmer