A party to a separation agreement recently found out that the other parent could avoid paying the agreed child support payments under the agreement by seeking a formula assessment by Inland Revenue.

The parties had entered into a separation agreement which set out the amount of monthly child support the liable parent was to pay. One of the clauses also stated that the Agreement released the parties of all “legal, statutory and beneficial rights, claims and demands”.

The Agreement also contained a clause which stated that the settlement was intended to be a “global agreement” to settle all issues between the parties.

Two years after the Agreement was made, the liable parent applied to Inland Revenue for a formula assessment of child support payments. Under the Child Support Act a formula assessment overrides any voluntary or private agreement for child support that parents have entered into.

In this case, Inland Revenue’s assessment of child support was significantly lower than what the parties had agreed under their Agreement.

The other parent applied to the Court to enforce the Agreement, arguing that the liable parent was bound to continue paying the higher amount of child support and argued that the Agreement did not constitute a “voluntary agreement” under the Act because it was not registered with Inland Revenue, and therefore could not be overridden by a child support formula assessment.

The Court rejected this argument, deciding that the Agreement was “voluntary”, and that there was nothing in the Act that required a child support agreement to be registered with Inland Revenue for it to be considered a voluntary agreement.

This meant that when the formula assessment was applied for, the child support obligations under the Separation Agreement became unenforceable.

The Court also rejected the claimant’s argument that the child support clause was part of a ‘global’ settlement. The Court relied on a severance clause in the Agreement which enabled the child support clause to be suspended without affecting the parties’ other contractual obligations.

The Court reiterated that a party to a child support agreement cannot contract out of the Child Support Act. The right to apply for a formula assessment is a personal right and cannot be circumvented.
The Court dismissed the parent’s claim.

This means that any child support payment agreed to between the parties cannot be enforced where one of the parties later applies to Inland Revenue to assess the payment amount. The assessed amount will override the previously agreed amount. If the agreed payment is higher than the Child Support Act provides, the higher amount will not be enforceable. If the agreed payment is lower than the Act provides, a higher payment can be enforced by the assessment process.

Parties to separation agreements therefore need to be aware that paying more or less in child support payments under the agreement because of other matters agreed in the settlement will not be enforceable if one of the parties later applies for an Inland Revenue formula assessment, which could leave the other party worse off because of other concessions made in the agreement.

It is important to be aware of your legal rights and obligations in relation to child support. If you are confused about child support, it pays to seek advice from a professional with experience in the area.

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are. At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.

Gianna Menzies and Hunter Flanagan-Connors