A child support trust (CST) is a way to fund a child's maintenance from a pool of capital instead of weekly or monthly payments. Australian family courts will order one when periodic payments are unreliable, when the paying parent is asset-rich but income-poor, or when the parties want a clean break. This article walks through what a CST is, why a court orders one over periodic payments, and how the leading cases (Bass & Bass, Aitken & Porteus, Mancuso & Abbott, He v Secretary) shape the limits of the structure.
Introduction
Q1: Can I just hand my ex a lump sum and be done with child support forever?
A: A lump sum can capitalise your maintenance liability so future administrative assessments are reduced or set off. The court only orders this where it is just and equitable, usually when periodic payments would not be paid at all. Aitken & Porteus [2009] FMCAfam 783. Reference: Aitken & Porteus [2009] FMCAfam 783
Q2: If I put money into a trust for the kids, does that take Services Australia out of the picture?
A: A private trust does not cancel the Services Australia administrative assessment. Section 66E of the Family Law Act bars family courts from making child maintenance orders for any child who is covered by an administrative assessment, so a CST has to operate alongside the statutory framework, not in place of it. He v Secretary, Department of Education, Skills and Employment [2024] FCA 819. Reference: He v Secretary, Department of Education, Skills and Employment [2024] FCA 819
Q3: When the trust ends, do I get the leftover money back if my child didn't end up needing all of it?
A: The surplus stays with the child if the trust deed says so. If the consent order requires the trustee to hold any residual capital for the child absolutely on winding up, the settlor parent has no resulting trust claim over the leftover funds. Bass & Bass and Anor [2016] FamCAFC 64. Reference: Bass & Bass and Anor [2016] FamCAFC 64
What is a child support trust under Australian law?
A child support trust is a court-recognised structure where capital is held by trustees and applied to discharge a parent's child maintenance obligations under the Child Support (Assessment) Act 1989. It is not a separate creature of statute. It is a private trust whose terms are forced into shape by a consent order or a court order that uses the lump sum mechanisms in the Act.
Section 124 of the Child Support (Assessment) Act 1989 lets a court order that the paying parent provide child support in a form other than periodic amounts:
"provide child support for the children other than in the form of periodic payments"
In plain English: instead of the standard weekly or monthly transfers calculated by Services Australia, the parent can be ordered to settle a one-off capital sum, transfer property, or set up a trust that will pay the maintenance instead.
A typical CST has these five elements:
- Created by consent or court order: the trust is born out of a consent order under Aitken & Porteus or a fully contested order, often in asset-rich/income-poor cases where a lump sum gives more certainty than a salary-based assessment.
- Capital settled by the paying parent: the settlor (usually the paying parent) transfers a defined corpus into a trust account, anchoring the child's support to existing assets rather than future income.
- Trustee applies capital and income for the child's maintenance: trustees, often both parents, are bound to spend the trust money on specific maintenance items (school fees, tutoring, medical costs) listed in the deed.
- Discharges the periodic child support obligation: the practical purpose is to reduce or eliminate the standard administrative assessment for the period the trust covers.
- Trust deed governs vesting and surplus: the deed must say when the trust winds up and what happens to leftover capital. If it says the residue is held for the child absolutely, the settlor cannot later claim it back.
"The husband achieved, by the making of the consent orders and the establishment of the CST [Child Support Trust], his manifest intention of eliminating any past, current or future administrative assessment of child support for the child."
A CST converts an ongoing maintenance liability into a secured fund. Once it is set up the way the consent order requires, the trust runs on its own terms and the settlor parent loses the flexibility, and the upside, of holding the capital personally.
Why use a child support trust instead of periodic payments?
A CST is used when periodic payments are unreliable, when the paying parent is asset-rich but income-poor, or when the parties want certainty and finality. The standard child support formula assumes salaried income that can be redirected through Services Australia. It works poorly when wealth sits in property, companies, or trusts while taxable income is reported low.
In those cases, weekly assessments produce ongoing fights about earning capacity, change of assessment, and enforcement. A CST sidesteps the fight by capitalising the obligation up front: the asset pool is locked in, the trustee runs the deed, and the receiving parent stops chasing payments.
What goes wrong without a CST when one would be appropriate:
- Default risk on periodic payments: without a secured asset pool, the receiving parent depends entirely on the other parent's voluntary compliance and continued solvency.
- Asset-rich, income-poor parent gaming the formula: a paying parent can structure their income through companies, trusts, or staged unemployment to keep their administrative assessment low while their lifestyle stays high.
- Future income volatility: imprisonment, business collapse, or sudden unemployment can wipe out periodic support overnight if no capital was set aside earlier.
- Capital not preserved for the child: periodic payments are spent on day-to-day costs; a trust ring-fences a corpus that has to be applied to the child's specific needs.
Case Study: Aitken & Porteus [2009] FMCAfam 783
The father had two children with the mother and presented as asset-rich but income-poor. He had not provided proper financial information or tax returns to the court. Evidence showed that while he claimed no capacity to pay child support, he had staged a departure from his employment, travelled overseas at significant expense, and bought land for another child at substantial cost. School fees, mortgage instalments, and the daughter's holiday expenses were being paid intermittently.
The mother sought a lump sum order under s 124 because periodic payments based on his declared income would be inadequate and, on his track record, unlikely to be paid. The father's position was that his obligations should be left as a periodic assessment, with his other voluntary financial commitments and lifestyle taking practical priority.
Outcome: the court ordered $48,000 as a lump sum under s 124 of the Child Support (Assessment) Act 1989, to be credited against future assessments. The judge accepted he had the capacity to borrow or sell assets to meet it, and observed that "if the amount of child support payable is not capitalised in a lump sum, it is unlikely to be paid at all." Failing to capitalise would cause significant hardship to the children.
In effect, a CST shifts the risk of non-payment off the child and onto the paying parent's existing assets. The child's maintenance is no longer hostage to the parent's future income or willingness to comply.
How do you structure and use a child support trust?
This section covers three common scenarios: settling a CST by consent order, getting a lump sum order from a court when payments are unreliable, and the limits of what a CST can do where an administrative assessment is in play.
Scenario 1: Settling a Child Support Trust by consent order
Settling a CST by consent order is the most common path. The paying parent transfers a capital sum, often hundreds of thousands of dollars, into a trust account whose trustees are typically both parents. The consent order gives the trust binding legal status and locks in mandatory terms that informal agreements cannot match.
To work, the consent orders must spell out how the trust functions. The standard mandatory terms cover the application of capital and income (school fees, tutoring, medical), the winding-up date, and what happens to any surplus left over. These pre-determined terms are what protect the structure from later attack: the settlor parent's intention is fixed at the time of the order, not reconstructed years later.
Common misconception: the parent who settles the funds keeps a beneficial interest in any leftover money and can have it returned if the child does not use it all.
Legal truth: any surplus must be held for the child absolutely once the trust deed or consent order says so; the funds do not revert to the settlor parent even if specific purposes (like private schooling) are not met.
"The surplus is there for his [the child's] benefit. That is [as] valid a purpose as any."
The husband and wife entered consent orders setting up a Child Support Trust for their child, who had special needs. The husband paid $350,000 into a bank account in the names of both parents as trustees. The orders included mandatory terms: the trust was to be wound up on 31 December 2015, and on winding up the trustees were to hold any residual corpus for the child absolutely.
After the winding-up date, the husband sought the return of the remaining $300,000. He argued the child had not attended private school as anticipated, the primary purpose of the trust had failed, and a resulting trust meant the surplus should revert to him as settlor.
Outcome: the Full Court (Strickland, Murphy and Kent JJ) rejected the resulting trust argument and dismissed the appeal. The husband's manifest intention, as expressed in the consent orders, was to eliminate future administrative assessments by providing a fund for the child's benefit. The trust had multiple valid purposes, and the surplus was clearly intended for the child.
Practical advice for drafting the trust deed:
- Clear vesting age and date: fix a precise calendar date or developmental milestone that triggers the winding up of the trust.
- Express surplus disposal clause: include a provision that all residual capital is held for the child absolutely, to head off resulting trust claims.
- Mandatory maintenance application: list the categories of expense (education, tutoring, medical, etc.) that the trustees must cover from trust funds.
- Tax responsibility allocation: name the parent responsible for tax on trust income and for the trust's administrative costs.
Scenario 2: Lump sum order under s 123A or s 124 when periodic payments are unreliable
Courts use the lump-sum powers in sections 123A and 124 of the Child Support (Assessment) Act 1989 when periodic assessment will fail the child. Typical triggers are a documented history of non-payment, current unemployment or imprisonment, or an asset-rich/income-poor profile that makes the formula unrealistic.
Section 123A lets a court order a lump sum that is credited against future administrative assessments. Section 124 is broader and lets a court order child support in a form other than periodic payments, such as a one-off capital transfer or property settlement. Either order is usually funded by liquidating an asset or accessing money already held in a solicitor's trust account from a property settlement.
Common misconception: a lump sum order can only be made if the paying parent agrees or admits capacity to pay.
Legal truth: the court has the power to order a lump sum on application by either party if it is just and equitable, prioritising the parent's primary duty to maintain children over other financial commitments.
"parents of a child have the primary duty to maintain the child and that has priority over all other commitments of the parent other than commitments to enable the parent to support himself or herself"
The father had been imprisoned from early 2009 until November 2011 and remained unemployed at the hearing. He had no current income but held $35,304.05 in a solicitor's trust account, representing his share of the proceeds from a property sale. The mother applied under s 123A for $10,000 of those funds to be paid as a lump sum to be credited against his child support assessments for their four children.
The father argued he had no real assets because his debts (a tax debt and a Credit Corp debt) exceeded the solicitor-held money. He wanted those creditors paid before any contribution to child support. In effect, he sought to use the trust money to settle his commercial and government liabilities ahead of his children.
Outcome: the court rejected those arguments and ordered $10,000 from the solicitor-held trust money. Phipps FM held that while the father's parents should be repaid a portion of the funds, the rest was properly applied to child support because the father's "duty to support his children has priority over his other liabilities other than the need to support himself." The order cleared the existing arrears and the next immediate period of support.
| Factor | Aitken & Porteus [2009] | Mancuso & Abbott [2012] |
|---|---|---|
| Section used | Section 124 | Section 123A |
| Asset / income profile | Asset-rich, income-poor with staged unemployment | Unemployed with history of imprisonment |
| Source of lump sum capital | Borrowing against, or sale of, real estate | Proceeds of property sale held in solicitor's trust |
| Lump sum amount ordered | $48,000 | $10,000 |
| Court's main reason | Periodic payments were unlikely to be paid at all | Duty to children takes priority over other creditors |
Practical advice on when to seek a lump sum order:
- Identify the asset-rich/income-poor profile: look for a parent who maintains an expensive lifestyle or owns land while reporting little or no taxable income.
- Document the history of non-payment: collect evidence of defaults, late payments, or "in the shadow of trial" contributions that show periodic payment is unreliable.
- Find the liquid pool: settlement proceeds, money in a solicitor's trust, or readily saleable property all give the court a concrete fund to draw on.
- Get advice early: act quickly if the paying parent is staging a departure from employment, hiding income, or about to dispose of assets. The lump sum power only works if the assets are still there.
Scenario 3: When a CST is NOT a substitute for administrative assessment
A CST or consent order has a hard ceiling. Section 66E of the Family Law Act 1975 strips family courts of the power to make a child maintenance order for any child who is eligible for an administrative assessment under the Child Support (Assessment) Act 1989. A private trust cannot be used to override or replace the Services Australia formula.
A CST therefore operates alongside the statutory framework, not instead of it. If you try to use a private contract or court order to "contract out" of the assessment, the order will generally be held unenforceable. The practical answer is to integrate the trust with the Act's own mechanisms, such as a binding child support agreement or a s 123A or s 124 order.
Common misconception: a private trust or consent order replaces the Services Australia administrative assessment of child support and removes the parents from the statutory framework.
Legal truth: section 66E of the Family Law Act 1975 bars family courts from making child maintenance orders for any child for whom an administrative assessment can be made; private arrangements operate alongside, not instead of, the statutory framework.
"s 66E of the Family Law Act withdrew the power of a family law court from making a child maintenance order for any child in respect of whom an administrative assessment of child support could be made under the CS Act in respect of the 'costs of the child'."
The father and his former wife, Ms Zhou, had consent orders from the Federal Circuit Court providing that the father be "solely responsible for all costs associated with the child's day-care." The father later relied on those orders to support a Child Care Benefit claim from Centrelink, arguing that the court order established his legal liability for the fees he had paid to the Avenues childcare provider.
The dispute was whether the consent order had successfully made the father "solely responsible" for the child's day-care costs in a way that displaced the statutory child support framework. Ms Zhou had signed the actual contract with the childcare provider; the father said the order should still be recognised for tax and benefit purposes outside the standard assessment rules.
Outcome: the Federal Court dismissed the father's appeal. Section 66E of the Family Law Act 1975 had stripped the family court of power to make a child maintenance order for any child for whom an administrative assessment could be made under the Child Support (Assessment) Act 1989. Parents cannot contract out of their statutory child support liability through private agreements or consent orders that fall outside the legislative framework.
Practical advice on what a CST can and cannot do:
- A CST does not displace s 66E: a trust cannot be used to bypass the family court's lack of jurisdiction over maintenance for children eligible for administrative assessment.
- A CST sits alongside the assessment: use the trust to provide non-periodic support that is formally credited against your assessed liability under the statutory framework.
- Use the Act's own mechanisms: structure the arrangement as a binding child support agreement, a s 123A lump sum, or a s 124 order so it has legal force.
- Check the assessment first: before drafting a trust deed or consent order, confirm whether the child is already covered by a Services Australia assessment so your orders are not undercut by s 66E.
For background on how the underlying child support assessment is challenged when school fees, debts, or inheritance change a parent's capacity, see Child Support: Debts, Inheritance and Private School Fees. For the separate question of maintenance once a child turns 18, see Adult Child Maintenance in Australia: Eligibility and Why Applications Fail.
Summary
- A child support trust is a structure, not a substitute for child support law. It runs alongside the Child Support (Assessment) Act 1989 as an asset-backed way to discharge maintenance, not as a way to escape the statutory system.
- Lump sum orders under s 123A or s 124 protect children from default risk. Capitalising future payments converts an uncertain ongoing liability into a secured fund that survives unemployment, imprisonment, or business collapse.
- Surplus capital in a CST belongs to the child, not the settlor parent. Once the trust deed says the residue is held for the child absolutely, the settlor has no resulting trust claim, even if the original purposes are not fulfilled.
- Section 66E means private orders cannot displace administrative assessments. Family courts cannot make a child maintenance order for a child eligible for assessment; the trust must integrate with the statutory framework, not override it.
- Practical use: get the trust deed drafted carefully or face surprise outcomes years later. Vague vesting terms or missing surplus clauses produce expensive litigation; the cases above show that the deed's wording, not the parties' later expectations, decides the result.
