Amendments to the Defence Home Ownership Assistance Scheme

Item 1 - Eligibility and Entitlements for Rejoining Members

Item 2 Ė Criteria for Issue of Subsidy Certificate

Item 3 - Conditions on Lump Sum Payment Options

Item 4 - Loan Limit for Multiple Party Loans

Item 5 - Delegation of the power to give notice of reviewable decisions

Examples for Rejoining Members

Permanent Force Members

Reserve Force Members

Combined Service Members

 

 

Amendments to the Defence Home Ownership Assistance Scheme

 

The DHOAS

 

The Defence Home Ownership Assistance Scheme (DHOAS) was introduced on 1 July 2008.

 

The DHOAS provides eligible Australian Defence Force (ADF) members with access to a subsidy on the interest incurred on their home loan.

 

The aim of the DHOAS is to improve ADF retention rates, by providing home loan subsidy assistance that increases as a member passes specified career points.

 

Information on DHOAS is available at http://www.dhoas.gov.au

 

DHOAS amendments

 

The operation of the DHOAS is governed by the provisions contained in the Defence Home Ownership Assistance Scheme Act 2008 and the Defence Home Ownership Assistance Scheme Regulations 2008.

 

Administration of the DHOAS has identified some unintended consequences of the legislation that were not consistent with the original policy intent of the DHOAS.

 

The Defence Legislation Amendment Bill (No.1) 2009, passed through Parliament on 18 June 2009 and received Royal Assent on 24 June 2009, enacting some changes to the DHOAS Act.  The amendments to the DHOAS Act will take effect 22 July 2009. The amendments do not apply retrospectively and do not affect any personís entitlements that are based on a subsidy certificate issued before 22 July 2009.

The changes impact on the:

 

Item 1 - Eligibility and Entitlements for Rejoining Members

Previous provision: members who rejoined the ADF prior to 1 July 2008 (when the scheme came into effect) may have accessed an unintentional Ďwindfallí because they were not subject to the schemeís restrictions on eligibility and entitlement that normally apply to a member who rejoins the ADF.

New provision: In line with the original policy intent of the DHOAS, all members are treated equitably under the DHOAS by providing that members who rejoined prior to 1 July 2008 are also subject to the provisions that apply to rejoining members.

The new provision also clarifies that service performed before a break in service of greater than five years is not considered to be effective for the purpose of calculation of a memberís eligibility or entitlement.

This new provision removes an unfair advantage to some members who had not provided continuous service.

Important: Changes to this provision are not retrospective. This will ensure that members who have been advised of an entitlement based on the previous provision do not suffer a detriment.

 

Item 2 Ė Criteria for Issue of Subsidy Certificate

A subsidy certificate is issued to an applicant so that it may be presented to a home loan provider as evidence of the memberís entitlement to payment of a subsidy.

Previous provision: A subsidy certificate could have been issued even if the member had exhausted their service credit and could not receive a subsidy payment.  This undermined the reliability of the certificate as evidence for home loan providers that a member was able to receive a subsidy on the loan provided.

A related problem is that the certificate does not expire if the recipient ceases to hold a service credit and has no reasonable expectation of accruing further credit.

New provision: In line with the original policy intent of the DHOAS, there will now be greater reliability of the subsidy certificate as evidence to a home loan provider that a subsidy is payable, by making the issue of a subsidy certificate conditional on a member having a Service credit.

A subsidy certificate also ceases to be in force if the holder of the certificate is not a member of the ADF and stops having a service credit.

No person is disadvantaged by these changes.

 

Item 3 - Conditions on Lump Sum Payment Options

Previous Ownership of Property

Previous provision: A member who previously owned an investment property whilst serving in the ADF was able to access the subsidy lump sum payment option to purchase a property to occupy as a home.

 

The previous provision was not equitable and was inconsistent with the original policy intent of the lump sum payment to assist genuine first home buyers.

 

New provision: In line with the original policy intent of the DHOAS, only those members who are buying a home for the first time while a member of the ADF have access to the subsidy lump sum payment option.

The lump sum is not payable where a person has owned a residential property, whether as a home or an investment, other than the property on which they are seeking the lump sum.

The lump sum is not paid on a residential property bought before a person was given the subsidy certificate that is the basis for the lump sum request. This prevents a person getting the lump sum where they have only owned the one property, but bought it some time previously.

The new provision is not intended to preclude people who own an interest in non-residential property.

Lump sum to be used in conjunction with monthly subsidy

Previous provision: A lump sum could have been used in isolation by a serving member, rejoining member or rejoining incapacitated member, as a member eligible on these grounds may use all their credit on a lump sum payment then cease to be eligible for further payment until they accrue further credit.

New provision: It is clarified that the subsidy may be payable either monthly, or as a lump sum payment plus monthly payment. Members who access the subsidy lump sum payment option must retain sufficient service credit to support on-going monthly subsidy payments.

 

Item 4 - Loan Limit for Multiple Party Loans

Previous provision: A person may have added their subsidised loan limit with their partnerís loan limit, allowing them to jointly apply their loan limits on a single loan up to the value of the loan.

New provision: In line with the original policy intent of the DHOAS, the entitlement of subsidised borrowers who enter into joint ownership with a person who is not defined as a Ďpartnerí in the Defence Home Ownership Assistance Scheme Act 2008, is proportional to their liability for the loan on the property.

The arrangements for partners who are subsidised borrowers on the same loan have been clarified. Each partner is taken to be liable for half the loan, and each is taken to have a loan limit equal to the average of both their loan limits as sole borrowers. This allows couples to maximise the subsidy that they can receive together, and simplifies the administration of this joint benefit.

Where only one partner is a subsidised borrower on the coupleís shared loan, then the subsidised borrower is taken to be liable for the whole loan and is able to use the full value of their loan limit as if they were a sole borrower.

Where a subsidised borrower has a shared loan with a person who is not their partner, in which both parties are jointly and severally liable, then the subsidised borrower is taken to be liable for half the loan and that is the capital amount against which their loan limit is compared. This prevents the indirect use of subsidy from the subsidised borrower for the benefit of a person who is not entitled or who has a separate entitlement in his or her own right.

 

Item 5 - Delegation of the power to give notice of reviewable decisions

Previous provision: Authority could not be delegated to an authorised Commonwealth contractor to exercise the power to notify applicants of the reasons for a first-instance decision that is amenable to internal review.  This added time and complexity to the process.

New provision: The Scheme Administrator has the delegated power of the Secretaryís function to provide written statements of reason for a decision that may be reviewable, including information about the affected personís rights.

 

 

Examples for Rejoining Members

The examples below relate to three categories:

A table of the DHOAS Subsidy Tiers, as at June 2009, is provided for quick reference:

DHOAS Subsidy Tiers 2008-2009

Subsidy Tier Level

Minimum Permanent Service

Minimum Reserve Service

Maximum Loan Limit

Maximum Monthly Subsidy

1

4 years

8 years

$187,159

Up to $199

2

8 years

12 years

$280,738

Up to $299

3

12 years

16 years

$374,318

Up to $399

 

DHOAS Subsidy Tiers 2009-2010

Subsidy Tier Level

Minimum Permanent Service

Minimum Reserve Service

Maximum Loan Limit

Maximum Monthly Subsidy

1

4 years

8 years

$171,629

Up to $183

2

8 years

12 years

$257,444

Up to $274

3

12 years

16 years

$343,258

Up to $366

 

 

Examples of the effect of amendments of the DHOAS Act and regulations

 

Permanent Force Members

 

Example 1

 

Description: Permanent member with continuous service

Service Chronology: 20 years permanent service

Treatment under current Act: Eligible as a serving member with 16 years service credit.

Treatment under amended Act*: No change.

Explanation: The amendments do not affect this member.

 

Example 2

 

Description: Permanent member with gap in service. Rejoined before 1 July 2008

Service Chronology:

   10 years permanent service

   4 years no service

   7 years permanent service

Treatment under current Act: Eligible as a serving member, with all year 17 years of service recognised. The member has a 13 year service credit after subtracting the four year qualifying period.

Treatment under amended Act*: Eligible as a rejoining member with 13 years service credit.

Explanation: The amendments brings this member into the category of rejoining members. The gap between the memberís periods of permanent service is less than 5 years, and so the prior period of service continues to count towards the memberís eligibility and service credit.

 

 

* The amended Act does not change the benefits credited to members with respect to a subsidy certificate issued before 22 July 2009.

 

Reserve Force Members

 

Example 1

 

Description: Reserve member with frequent service.

Service Chronology: 12 consecutive years reserve service.

Treatment under current Act: Eligible as serving member with 4 years service credit.

Treatment under amended Act*: No change.

Explanation: The amendments do not affect this member.

 

Example 2

 

Description: Reserve member with intermittent service, rejoined after 1 Jul 2008.

Service Chronology:

   9 consecutive years reserve service

   1 year no service

   2 years reserve service

   1 year no service

   Recommenced reserve service Aug 2008

Treatment under current Act: Eligible as rejoining member, with all service years recognised. The member has a 3 year service credit after subtracting the eight year qualifying period for Reservists. The member has accrued a 4th year of service credit for 2008-09 by completing at least 20 days of Reserve service within the financial year.

Treatment under amended Act*: No change.

Explanation: The member is already treated as a rejoining member, consistent with the policy intent.

 

Example 3

 

Description: Reserve member with intermittent service, rejoined before 1 Jul 2008.

Service Chronology:

      9 consecutive years reserve service

      3 years no service

      2 years reserve service

      1 year no service

      2 years reserve service

Treatment under current Act: Eligible as serving member, with all 13 years of service recognized. The member has a 5 year service credit after subtracting the eight year qualifying period for Reservists.

Treatment under amended Act*: Eligible as rejoining member. Their 9 years of service prior to the three year break is recognised for the purpose of completing the eight year qualifying period, but not for calculating a service credit. This gives them a 4 year service credit.

Explanation: The amendments bring this member into the category of rejoining members. Because the member has a gap of greater than 2 but less than 5 years between periods of reserve service (the 3-year gap after the first period of service), service prior to the gap counts towards the memberís eligibility but not towards the memberís service credit. Only service after this gap counts towards service credit. Because the second gap in service is not more than 2 years, the service immediately prior counts towards the memberís eligibility and service credit.

 

* The amended Act does not change the benefits credited to members with respect to a subsidy certificate issued before 22 July 2009.

 

Combined Service Members

 

Example 1

 

Description: Combined service member with no gaps in service.

Service Chronology:

   8 years permanent service

   3 years reserve service

   2 years permanent service

Treatment under current Act: Eligible as a serving member with 9 years of service credit.

Treatment under amended Act*: No change.

Explanation: The amendments do not affect this member.

 

Example 2

 

Description: Combined service member with short gaps in service, rejoined before 1 Jul 2008.

Service Chronology:

   8 years permanent service

   1 year no service

   3 years reserve service

   1 year no service

   2 years reserve service

Treatment under current Act: Eligible as a serving member with 9 years of service credit.

Treatment under amended Act*: Eligible as a rejoining member with 9 years of service credit.

Explanation: The amendments bring this member into the category of rejoining members. Because the gaps before each period of reserve service are not more than 2 years, all of the memberís prior service counts towards eligibility and entitlement, and there is no change in the memberís service credit.

 

Example 3

 

Description: Combined service member with long gaps in service, rejoined before 1 Jul 2008.

Service Chronology:

   8 years permanent service

   4 years no service

   3 years reserve service

   3 years no service

   2 years permanent service

Treatment under current Act: Eligible as a serving member with all 13 years of service recognised. The member has a 9 year service credit after subtracting the four year qualifying period for the Permanent Forces.

Treatment under amended Act*: Eligible as a rejoining member with a 5 year service credit.

Explanation: The amendments bring this member into the category of rejoining members. Because the member has a gap of greater than 2 but less than 5 years prior to the period of reserve service, the 8 years of prior permanent service contributes to eligibility, but not to accrual of a service credit. Because the gap between the end of the period of reserve service and rejoining the permanent force is less than 5 years, the reserve service counts towards accrual of a service credit.

* The amended Act will not change the benefits credited to members with respect to a subsidy certificate issued before 22 July 2009.

 

Last updated: 24 June 2009