5.3.3 Crediting Lump Sum Payments

Context

The Registrar can credit lump sum payments of child support if the lump sum payment provisions are contained in a binding child support agreement or court order, and the amount of the lump sum equals or exceeds the annual rate of child support payable under an administrative assessment.

Act references

CSRC Act section 66, section 69A

CSA Act section 84(1)(e), section 84(7), section 84(8), section 123A

Description

When the Registrar is notified that a lump sum payment has been paid in accordance with either of the following:

  • a binding child support agreement (2.7.1) between the parents or non-parent carer which contains lump sum payment provisions (CSA Act section 84(1)(e)), or
  • a court order which contains lump sum payment provisions (4.3.2) (CSA Act section 123A)

then the Registrar must credit the lump sum payment (CSRC Act section 69A).

Lump sum payments must be for an amount that is equal to or exceeds the current annual rate of child support payable under the administrative assessment (CSA Act section 84 (7)(c)(ii)). See 2.7.1 for more information about lump sum payment provisions.

How lump sum payments are credited

Lump sum payments do not change the child support liability under the administrative assessment. Instead, they are credited at the end of the financial year against the liability. The ongoing child support payments are still payable at the time they become due, but they are reduced by the amount of the lump sum payment which will be credited against the liability at the end of the financial year.

Unless otherwise specified, the lump sum payment will be credited against 100% of the annual child support liability. However, if the agreement or court order specifies otherwise, it may be credited at a percentage that is less than 100% and the payer will still be required to make ongoing child support payments at a reduced rate (CSRC Act section 69A(2)(a)(i)).

At the end of each financial year, the Registrar must reduce the remaining lump sum payment by the amount which has been credited against the liability under the child support assessment for that financial year, or since the start of the child support case if the case began later than the start of the financial year (CSRC Act section 69A).

At 1 July each year, the remaining lump sum payment is indexed in accordance with the CPI (CSRC Act section 69A(5)). This is to protect the value of the lump sum over time. The remaining lump sum payment continues to be credited against the payer's annual liability until the full value of the lump sum has been credited.

Example: F and M enter into a binding agreement with lump sum payment provisions. F is liable to pay child support of $5,000 per annum to M under an administrative assessment. The lump sum is for an amount of $20,000. F is not required to pay child support to M as their child support assessment is met from the remaining lump sum payment. At the end of the financial year, the Registrar reduces the remaining lump sum by $5,000 which covers the full amount of the administrative assessment for that year. The amount credited annually from the lump sum payment is equivalent to the annual amount of child support payable under an administrative assessment for that year (or part thereof if the remaining lump sum does not equal the full amount of the administrative assessment for that year). The remaining lump sum is increased annually in accordance with CPI.

Example: F and M have a court order with lump sum payment provisions. F is liable to pay child support of $5,000 per annum to M under an administrative assessment. The lump sum is for an amount of $20,000 and is to reduce the administrative assessment by 50% per annum. F is still required to pay the 50% of the child support assessment ($2,500 per annum) which is not being met from the remaining lump sum payment. At the end of the financial year, the Registrar reduces the lump sum by $2,500. The amount credited annually from the remaining lump sum will be equivalent to 50% of the annual amount of child support payable under an administrative assessment for that year (or part thereof if the remaining lump sum does not equal 50% of the administrative assessment for that year). The remaining lump sum is increased annually in accordance with CPI.

Once the remaining lump sum payment reaches a nil balance, the payer is required to recommence making all ongoing child support payments pursuant to the administrative assessment.

Last reviewed: 15 August 2016