House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Minister for Veterans and Defence Personnel, the Honourable Darren Chester MP)

GENERAL OUTLINE

1. The proposed Bill includes two measures:

a.

to amend the Defence Home Ownership Assistance Scheme Act 2008 to extend the period after a member leaves the Australian Defence Force (ADF) when they can access the Defence Home Ownership Assistance Scheme from two years to five years; and

b.

to amend the Australian Defence Force Superannuation Act 2015 to clarify that ADF Super can be opened up so that former ADF members can continue to make contributions to their ADF Super accounts, and to make associated amendments to the Superannuation Industry (Supervision) Act 1993.

Schedule 1: Defence Home Ownership Assistance Scheme Act 2008 amendments

2. The Defence Home Ownership Assistance Scheme (DHOAS) assists current and former ADF members and their families to achieve home ownership. Home ownership assistance is made available to help those ADF members and their families who choose to purchase a home of their own to live in. It is provided in response to the additional difficulties that ADF members and their families have in purchasing a home as a result of the nature of their service.

3. DHOAS is aimed at improving ADF recruitment and retention. Under the scheme, ADF members who have completed a sufficient period of service are eligible to receive a subsidy from the Commonwealth to be paid against a home loan related to a home in which they and their family live. The scheme pays a progressively higher level of subsidy as ADF members serve for longer periods, providing an incentive for ADF members to remain in active service.

4. Generally, when an eligible ADF member accesses the scheme, they will apply for a subsidy certificate, and take the certificate to a Home Loan Provider to access a DHOAS home loan. The subsidy certificate is valid for 12 months.

5. An ADF member who meets the criteria for the scheme when they separate from the ADF can continue to access the scheme for a limited period after they leave. At present, a veteran must generally apply for a subsidy certificate within two years of leaving the ADF. There is discretion to extend the two year period if the veteran has a compensable condition that led to their failure to apply for the subsidy within two years. After leaving the ADF, veterans are only able to apply for and be granted a subsidy certificate once, and if they do not use it within 12 months of it being granted, they lose the opportunity to access the scheme. The limited period was included in the scheme to encourage veterans to use their remaining entitlement as soon as possible after leaving the ADF to assist with their resettlement in the community.

6. The amendments will extend the time after a member separates from the ADF when they can apply for a subsidy certificate to five years. The extension of two years to five years will assist veterans transitioning to civilian life by allowing additional time to look for suitable accommodation before applying and accessing the DHOAS. The current two-year limitation is not always enough time to enable veterans and their families to make the best choices for themselves. The intention is to ensure that all veterans will be able to carefully consider their options after leaving the ADF, without being rushed into purchasing a home for fear of losing their entitlement to the subsidy.

Schedule 2: Australian Defence Force Superannuation Act 2015 amendments

7. The Australian Defence Force Superannuation Act 2015 introduced a new superannuation scheme for ADF members from 1 July 2016. ADF Super is an accumulation fund, and Defence makes contributions for Permanent ADF members or Reserve members rendering continuous full-time service who are ADF Super members at 16.4% of their salary.

8. At present, when an ADF Super member leaves the ADF, they can no longer make contributions to ADF Super. Any superannuation contributions from a subsequent civilian employer, for example, must be made to a different superannuation fund.

9. ADF Super will be opened up so that ADF Super members who have left the ADF, and who provided at least 12 months of service, can continue to make contributions to ADF Super. This is consistent with similar changes that have been made to the Public Sector Superannuation Accumulation Plan (PSSap - the superannuation fund for Australian Government employees). This change will be implemented through changes to the ADF Super Trust Deed, to take effect in early 2020. The purpose of the amendments in this Bill are to make it absolutely clear that the scheme can be opened up in this way.

10. The Bill also includes consequential amendments to the Superannuation Industry (Supervision) Act 1993 (SIS Act). At present, that Act excludes ADF Super from the general requirement for superannuation funds to take out insurance in order to offer permanent incapacity and death benefits to fund members. Due to the difficulty in obtaining relevant insurance for serving ADF members, the SIS Act excludes ADF Super from this requirement. Instead, serving ADF members are covered for death and permanent incapacity under the Australian Defence Force Cover Act 2015. The amendments to the SIS Act will require ADF Super to obtain relevant insurance products for ADF Super members who are no longer serving in the ADF.

Financial Impact Statement

11. The amendments to the Defence Home Ownership Assistance Scheme Act 2008 in Schedule 1 of the Bill are expected to have a modest financial impact. The financial impact is an estimated additional cost of $1.8 million from the budget year and the forward estimate period.