Key points

• The Defence Home Ownership Assistance Scheme Amendment Bill 2022 seeks to implement the Albanese Government’s October 2022–23 Budget commitment to reform the Defence Home Ownership Assistance Scheme (DHOAS) by 1 January 2023.
• DHOAS reform was part of the Australian Labor Party’s Veterans policy commitment in the 2022 election.
• The Bill reduces the minimum qualifying service periods to access the DHOAS’s three subsidy tiers.
• The Bill also seeks to allow veterans and their families to access DHOAS any time after they have completed their service rather than within the current 5-year timeframe.

Introductory Info

Date introduced:  27 October 2022
House:  House of Representatives
Portfolio: Defence
Commencement: 1 January 2023

Purpose and structure of the Bill

The Defence Home Ownership Assistance Scheme Amendment Bill 2022 (the Bill) seeks to amend the Defence Home Ownership Assistance Scheme Act 2008 (DHOAS Act) to expand the eligibility criteria for the Defence Home Ownership Assistance Scheme (DHOAS) as part of the Australian Defence Force’s (ADF’s) recruitment and retention package.

The Bill’s only Schedule amends the DHOAS Act to:

• remove the 5-year post-separation timeframe for accessing DHOAS
• reduce the qualifying service period for Permanent, Reserve and foreign service members to access DHOAS and the minimum effective service periods for each subsidy tier
• create a power for the Secretary to declare that a subsidy payment ceasing event had not occurred, such as when all outstanding amounts under the loan have been paid but this was found to have occurred due to a genuine error, mistake or accident and
• insert a recoverable payments mechanism to address the potential risk of breaching ‘section 83 of the Constitution arising from payments purportedly made under the Act, in good faith in the bona fide administration of the Act, but that are not supported by the Act’.[1]

Background

The Defence Home Ownership Assistance Scheme was established in 2008 by the DHOAS Act to replace its predecessor the Defence HomeOwner Scheme (DHOS), which was set up in 1991. The DHOAS Act was, in large part, a response to concerns about the ADF’s ability to recruit and retain personnel.[2]

The Australian National Audit Office (ANAO) had conducted audits into problems around the retention of ADF personnel in 2000 and a follow-up audit in 2003. Both audits noted the importance of ‘quality of life’ issues to the retention of ADF members and the second asserted:

Expenditure on retention has the potential to be much more cost effective than expenditure on recruitment and training.[3]

Problems with recruitment and retention continued through 2005 and, in May 2006, the Government initiated a review of the DHOS.[4] On 31 May 2006 the Government introduced a Bill that amended the Defence Force (Home Loans Assistance) Act 1990 extending the DHOS ‘finishing day’ by one year (from 31 December 2006 to 31 December 2007) to allow enough time to complete the review and make necessary changes.[5]

In response to this review, and as a part of the 2007 Budget measures focused on recruitment and retention, the Minister for Defence announced that the DHOS would be replaced with a new scheme which would enhance assistance by providing for higher benefits as members serve for longer periods and would allow members to choose a mortgage provider (the old scheme had one specified provider).[6]

The Defence Force (Home Loans Assistance) Amendment Act 2007 provided for a further extension of the DHOS to 30 June 2008 to allow time for the new Scheme to be fully developed and implemented.[7] However, relevant legislation had not been introduced when Parliament was prorogued on 15 October 2007. The Rudd Government supported the idea and the Defence Home Ownership Assistance Scheme Bill 2008 was introduced and passed in Parliament in June 2008.[8] The DHOAS commenced on 1 July 2008.[9] The Scheme is administered by the Department of Veterans’ Affairs.[10]

In 2015 the ANAO conducted an audit of the DHOAS and found that from mid-2008 to the end of 2014 more than 30,000 ADF members had accessed the Scheme totalling $395 million in paid subsidies.[11] Recent Defence annual reports show continued interest in the DHOAS with 6,123 applications processed and 3,602 subsidy payments made during 2020–21.[12]

ALP election policy

The current Bill was foreshadowed in the Australian Labor Party’s Veterans policy for the 2022 election.[13] This stated that ‘Labor will boost home ownership for defence personnel and veterans by expanding the eligibility criteria for the Defence Home Ownership Assistance Scheme (DHOAS)’.[14]

Qualifying time

The Bill reduces the qualifying time that a member must have served in order to be eligible for the Scheme and, in turn, amends the period of effective service needed to access each tier of the DHOAS.

Committee consideration

Selection of Bills Committee

At its meeting on 27 October 2022 the Senate Selection of Bills Committee deferred consideration of the Bill until its next meeting.[15]

Senate Standing Committee for the Scrutiny of Bills

At the time of writing, the Senate Standing Committee for the Scrutiny of Bills had not yet commented on the Bill.

Policy position of non-government parties/independents

The Leader of the Opposition, Peter Dutton, expressed support for the Bill in his Budget in Reply speech on 27 October 2022:

The Coalition strongly supports the Government’s commitment to expand the Defence Home Ownership Assistance Scheme.[16]

Position of major interest groups

At the time of writing no major interest groups had commented on the Bill.

Financial implications

The October 2022–23 Budget included measures for expanding access to the DHOAS noting the Government would provide $46.2 million over four years from 2022–23 and approximately $17.8 million per year ongoing. The cost of this measure will be met from within existing Defence resources.[17] This is reflected in the Explanatory Memorandum, where the Bill is described as having ‘moderate financial impact’.[18]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[19]

The Explanatory Memorandum indicates that the Bill advances the right to an adequate standard of living and does not negatively impact any human rights.[20]

Parliamentary Joint Committee on Human Rights

At the time of writing the Parliamentary Joint Committee on Human Rights had not yet commented on the Bill.

Key issues and provisions

Amended time frames

Part 2 of the DHOAS Act deals with the eligibility criteria for access to the DHOAS including specified qualifying service periods for Permanent, Reserve and foreign service members[21] under section 8 and re-joining incapacitated members under section 10.

Items 1–3 of the Bill amend subsection 8(2) so that:

• the qualifying time period for a serving Member of the Permanent Forces is reduced from four years to two years: amended paragraph 8(2)(a)
• the qualifying time period for a Reserve member is reduced from eight years to four years: amended paragraph 8(2)(b)
• the qualifying time period for a foreign service member is reduced from four years to two years: amended paragraph 8(2)(c).

Similarly, items 4 and 5 of the Bill amend subsection 10(2) to reduce the qualifying service period for Permanent rejoining incapacitated members[22] from four years to two years (amended paragraph 10(2)(a)) and for Reservists from eight years to four years: amended paragraph 10(2)(b).

Item 12 repeals and replaces the table in subsection 51(2) of the DHOAS Act to reflect these changes to eligibility periods.

Subsidies

Existing sections 17 and 18 of the DHOAS Act deal with the decision-making process for authorising a subsidy certificate to an eligible applicant, including surviving partners of deceased members, in which a 5-year post-separation limitation applies.[23]

Item 7 of the Bill repeals existing subsections 17(2) and (3) relating to incapacitated members and separated members. Similarly, item 9 of the Bill repeals existing subsections 18(2) and (3) relating to surviving partners. This effectively removes the five year limitation after leaving military service to apply for a DHOAS subsidy.

Section 36 of the DHOAS Act sets out in table form the events that cause a subsidy to cease and the time at which it might cease. In particular, Table item 1 states that the subsidy stops being payable if ‘all outstanding amounts due under the subsidised loan are paid’.

Item 11 of the Bill inserts proposed subsection 36(2) into the DHOAS Act to allow the Secretary to declare that an event covered by Table item 1 is deemed not to have occurred where outstanding amounts were paid due to a genuine accident, error or mistake. A refusal by the Secretary to make such a declaration may be subject to internal review and then review by the Administrative Appeals Tribunal (AAT): proposed table item 6A in section 71, inserted by item 13 of the Bill.

Section 83 of the Constitution provides that the Government cannot spend money that has not been appropriated by law. Section 84 of the DHOAS Act appropriates the Consolidated Revenue Fund for payments of subsidy and taxes payable in respect of payments of subsidy under the Act. This raises a risk that payments that are intended to be made as subsidies (or taxes), but that do not meet the requirements of the Act, are not supported by an appropriation and therefore in breach of section 83 of the Constitution. This could occur, for example, where a payment is made to a person who is not eligible to receive a subsidy payment under the DHOAS Act. In that case the payment cannot properly be characterised as a ‘payment of subsidy’ under the Act, and therefore may not be authorised by section 84 of the DHOAS Act.

Item 14 of the Bill inserts proposed sections 84A and 84B into the DHOAS Act to address this risk. Proposed section 84A provides the Commonwealth with authorisation to pay an amount which the Act would not otherwise authorise, where the payment is purportedly the payment of a subsidy (or taxes on a purported subsidy payment). Proposed paragraphs 84A(c) and (d) provide that such payments are taken to be payments of subsidy or taxes payable under the Act, for the purposes of section 84. Proposed paragraph 84A(e) provides that if such a payment is not an overpaid amount, it is recoverable as a debt due to the Commonwealth and may be recovered through legal action.[24]  

Proposed section 84B requires the Secretary to report on the payments covered by proposed section 84A (that is, payments of subsidy and taxes that would not, absent section 84A, meet the Act’s requirements). Specifically:

• Proposed subsection 84B(1) stipulates the content to be reported, including the number of relevant payments and the total amount of such payments.
• Proposed subsection 84B(2) specifies the reporting period is a financial year unless a shorter period is determined by the Minister.
• Proposed subsection 84B(3) states that reports are not necessary where, to the Secretary’s knowledge, no relevant payments have been made.
• Proposed subsection 84B(4) requires reports to be published within four months after the reporting period ends unless a shorter period is determined by the Minister.
• Proposed subsection 84B(5) allows the Minister, via legislative instrument, to make determinations in relation to the reporting periods.

Application and transition provisions

Part 2 of the Bill outlines the application of the proposed amendments to the DHOAS Act should the Bill be enacted.

Item 15 states that the proposed amendments made to sections 8 and 10 of the DHOAS Act (by items 1 to 5 of the Bill) reducing the qualifying service periods for applicants, apply ‘whether the person completed their qualifying service before, on or after the commencement’ of the Bill. According to the Minister’s second reading speech, from 1 January 2023 applications for subsidy certificates can be made under the amended DHOAS by new applicants as well as veterans who previously had their applications rejected under the former criteria.[25] Additionally, existing DHOAS members who have not reached their maximum accrued subsidy period are likely to receive an increase in their subsidy payments and service credits.[26]

Item 16 permits a new application to be submitted by a separated member who was previously refused a subsidy certificate. At commencement of the proposed amendments, a previous application can be disregarded if:

(a)    it was made and refused prior to commencement on 1 January 2023

(b)   the applicant was not a Defence Force member when the application was refused

(c)    the applicant would have been considered suitable to receive a subsidy certificate under the proposed amendments.

Item 17 provides that the amendments to section 17 that remove the 5-year post-separation timeframe (at item 7 of the Bill) apply in relation to an applicant who is not a member of the Defence Force, whether they stopped being a member before, on or after the Bill commences. Similarly, the amendments to section 18 (at item 9 of the Bill) apply in relation to an applicant who is a surviving partner of a deceased member, regardless of whether the deceased partner stopped being a member or died before, on or after the Bill commences.

Item 18 provides that the power of the Secretary to declare that a subsidised borrower had not paid all outstanding amounts due to a genuine accident, error or mistake operates in relation to an event that occurs on or after the commencement date.

Item 19 allows the loan limits for existing borrowers to be adjusted in line with the proposed amendments after the commencement on 1 January 2023.

Item 20 relates to the new reporting regime under proposed section 84B and provides that it relates to a payment made under proposed section 84A during a reporting period ends after the commencement. For instance, the reporting period might be from 1 July 2022 to 30 June 2023. As 30 June 2023 is after the commencement date, any section 84A payment made during that period should be included in the report—even though the start of the reporting period was a date prior to the commencement date.