Annual Report 2004-05

Annual Report on the Administration and Operation of the Defence Force (Home Loans Assistance) Act 1990

Legislation

The Defence HomeOwner Scheme is covered by the Defence Force (Home Loans Assistance) Act 1990 (the Act). Section 39 of the Act requires that an annual report be prepared for the Minister on the administration and operation of the Act. The annual report is set out below.

Description

The Defence HomeOwner Scheme is an Australian Government initiative that provides a subsidy on the interest payable on a home loan for members of the ADF. The scheme is open to permanent Defence Force members who enlisted on or after 15 May 1985 and to those permanent Defence Force members who elected to revoke their entitlement under the Defence Service Homes Scheme in favour of a Defence HomeOwner entitlement. Reserve and Emergency Force personnel who provide part-time efficient service are also eligible for assistance.

The Defence Housing Authority administers the scheme for Defence. The benefits are provided under an agreement between the National Australia Bank and the Commonwealth. Under the scheme, the Commonwealth assesses eligibility and entitlement and pays monthly interest subsidies on loans provided by the National Australia Bank. Interest subsidy is paid on loans between $10,000 and $80,000. Spouses who are both members of the ADF can apply for a combined subsidised loan of up to $160,000. The subsidy amount is calculated at 40 per cent of the average monthly interest payment.

Providing a person has a period of entitlement, the subsidised loans can be used from one home to another during service as often as is required and once within two years of the date of separation from the ADF.

Subsidy Entitlement

The subsidy entitlement period is calculated on the number of completed years of effective full-time service after completion of a five-year qualifying period. The qualifying period for Active Reservists is eight continuous years of efficient service.

For members with operational or war-like service, the five-year qualifying period does not apply and the maximum period of the subsidy may be extended from 20 to 25 years. There are special considerations for re-joining members, widows and widowers, eligible persons and members discharged as a result of a compensable disability.

Objectives

The objectives of the Defence HomeOwner Scheme are to attract and retain ADF personnel, to encourage home ownership during service as a cost-effective alternative to rental assistance and to assist in the reintegration of ADF personnel into the community on return to civilian life.

Home Loan Assistance Applications

The objectives of the Defence HomeOwner Scheme are achieved by providing a subsidised home loan for a period which is directly related to the member's length of service with the Permanent or Reserve Forces, bringing home ownership within the reach of more members and providing a subsidised loan once within two years of separation from the ADF.

During 2004-05, there were 1,913 applications for entitlement certificates and 1,301 applications for loan subsidies processed. The total number of approved loans current as at 30 June 2005 was 6,683. Since a peak in 2000-01 there has been a small gradual decline in the take up rate.

Of new subsidy applications, 40 per cent were to assist in the reintegration of ADF personnel into the community on return to civilian life, through discharge or transfer to the Reserves. This is slightly higher than last year's figure of 35 per cent.

Subject to meeting eligibility requirements, members of the ADF can access the Government's First Home Buyers Scheme and the Defence Home Purchase Assistance Scheme.