Appendices

Legislation

The Defence HomeOwner Scheme is covered by the Defence Force (Home Loans Assistance) Act 1990. 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.

The contractual arrangements with the National Australia Bank for the provision of loans under the Defence HomeOwner Scheme was due to expire on 31 December 2006. The Government agreed to introduce legislation to extend the provisions of the Act and the contractual arrangement with the National Australia Bank to 31 December 2007, to allow Defence to undertake a review of the scheme.

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 ADF 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 efficient part-time service are also eligible for assistance.

DHA administers the scheme on behalf of Defence. The benefits are provided under a contractual arrangement between the National Australia Bank and the Commonwealth. 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.

Providing a person has a period of entitlement, the subsidised loans can be transferred 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.

Performance for 2005–06

During 2005–06, there were 1,724 applications for entitlement certificates and 1,184 applications for loan subsidies processed. The total number of approved loans current as at 30 June 2006 was 6,745. Since a peak in 2001–02, there has been a gradual decline in the take up-rate, which is due mainly to the significant increase in the cost of housing.

Of new subsidy applications, 44 per cent were from members either discharging or transferring to the Reserves. This is slightly higher than last year.

Table 6.36 Applications for Payment of Subsidy by Type of Assistance⁽¹⁾

Activity	2001–02	2002–03	2003–04	2004–05	2005–06
Buy a home	1,042	953	845	744	661
Refinance a loan	321	356	365	366	338
Enlarge a home	11	4	5	2	8
Build a home	220	186	160	156	145
Renovate a home	54	45	53	33	32
Total	1,648	1,544	1,428	1,301	1,184

Table 6.37 Comparison of Activities

Activity	2001–02	2002–03	2003–04	2004–05	2005–06
Applications for entitlement certificate received	2,451	2,271	2,095	1,913	1,724
Entitlement certificate issued(1)	2,342	2,186	2,032	1,855	1,674
Applications for entitlement certificate declined/withdrawn	109	85	63	58	50
Applications for payments of subsidy received	1,648	1,544	1,428	1,301	1,184
Applications for payments of subsidy approved	1,634	1,520	1,398	1,286	1,170
Applications for subsidy declined/withdrawn	14	24	30	15	14
Amount of Commonwealth subsidy paid	$6.453m	$7.442m	$8.269m	$9.289m	$9.868m
Number of subsidy payees as at 30 June	5,816	6,195	6,481	6,683	6,745

Performance Evaluation of the Administration of the Scheme

Defence is satisfied with the administration of the scheme by DHA. During the reporting period, there was one appeal lodged with the Administrative Appeals Tribunal against a decision made by the delegate, which resulted in a mutually agreed outcome.

The National Australia Bank has provided effective support to the scheme. The National Australia Bank and the Defence Housing Authority continue in their efforts to streamline the administration process of obtaining the subsidy.

Operational Costs

An annual management fee of $525,525 (including GST) was paid in 2005–06 to DHA by Defence. The Authority was also paid a fee in respect of each application for entitlement certificates lodged. These fees totalled $139,385 (including GST).

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