Defence Force (Home Loans Assistance) Act 1990

The Act affects serving members and former members of the permanent Australian Defence Force (Army, Navy, Air Force) who are not covered by the DSH Act, and certain members of the Reserve Forces who have completed a prescribed training period. It also affects the National Australia Bank and any successor lender holding the Bank's rights under the agreement.

The scheme excluded DSH Act recipients because that Act already provided comparable home loan assistance to veterans. Non-DSH members are primarily those who entered the Defence Force after the DSH Act's coverage was more narrowly defined, or those who elected out of DSH Act coverage.

The Secretary of the responsible Department administers eligibility decisions and certificate issue. Appeals from the Secretary's decisions lie to the Administrative Appeals Tribunal (Part 4, Miscellaneous provisions) rather than a specialist tribunal. The Privacy Act 1988 applies to personal information used or disclosed under the scheme (section 36).

Surviving spouses and de facto partners are affected by provisions dealing with subsidy continuity after a borrower's death (section 27). A surviving spouse who inherits and occupies the house takes over the subsidy entitlement in certain circumstances.

The Secretary must issue an entitlement certificate to an eligible person who satisfies the criteria in section 12 (or section 12A for post-2008 Act cases) and must not issue a certificate after 1 July 2008 (section 12(1)(g)). The Secretary must give a copy of any cancellation notice to the Bank (section 13(3)), and must give a copy of any variation or substitution of a certificate to the Bank (section 13(4)).

The borrower (entitled person) must use the house as a principal home and must not own another house in Australia (section 20(2)(d) and (e)). The house must be owner-occupied, must not be used for business purposes, and must be secured by a first mortgage (unless the agreement provides otherwise) (section 20(2)(f)).

The borrower must notify the Secretary if circumstances change, including if the person sells or transfers the house, ceases to occupy it as a home, or acquires another property. Failure to notify triggers suspension or cessation of subsidy.

The Bank must apply subsidy payments in accordance with the agreement, specifically in the manner set out in clause 8 of the agreement (relating to repayment obligations and recovery by the Commonwealth).

Annual reporting: The Secretary must prepare an annual report on the administration of the Act for each financial year and give it to the Minister, who must table it in each House within 15 sitting days of receiving it (section 39).

The Secretary has power to issue, vary, cancel, and substitute entitlement certificates (sections 12 and 13). The Secretary must cancel a certificate if the Secretary is satisfied that the holder is no longer eligible (section 13(1)). The Secretary may vary a certificate to correct an error or omission (section 13(2)(a)).

The Minister may, by legislative instrument, declare duty to be warlike service (section 3C). A warlike service declaration may take effect retrospectively and may relate to duty performed before the section commenced. Declarations may also be varied or revoked.

Delegation: The Secretary may delegate all or any of the Secretary's powers and functions to officers of the Department, members (being officers) of the Defence Force, members or staff of Defence Housing Australia, and delegates of the Secretary under the 2008 Act (section 37).

Loan increases: A subsidised borrower who wishes to increase the advanced amount beyond the initial loan may apply to the Secretary for approval of subsidy in respect of the increase (section 14). Applications by persons who have resigned, retired, or been discharged (other than rejoining members and certain operational service members) must be made within two years after the day of separation.

Approval of loan increases is discretionary but follows prescribed criteria. The total advanced amount after the increase must not exceed $80,000 (section 21).

The Act does not create criminal offences for borrowers. The enforcement mechanism is suspension or cessation of subsidy rather than prosecution.

Subsidy suspension: Under section 27, when a prescribed borrower dies and the surviving spouse or de facto partner inherits the house, subsidy is suspended until the house is sold or transferred under the will or intestacy law.

Subsidy cessation: Under section 29, subsidy ceases if the house to which the subsidised loan relates is sold, transferred, ceases to be the borrower's principal home, or ceases to meet the conditions in section 20(2). Subsidy may resume if the original conditions are restored in limited circumstances.

Recovery by the Commonwealth: Clause 8 of the agreement (incorporated by reference throughout Part 3) provides for recovery of subsidy amounts from the borrower in certain circumstances. The Commonwealth may recover amounts under clause 8.2 and 8.4 of the agreement. The Consolidated Revenue Fund is appropriated for payments of subsidy to the Bank (section 38).

Administrative Appeals Tribunal review: Decisions of the Secretary on eligibility, certificate issue, and loan increases are reviewable by the Administrative Appeals Tribunal. The Act specifies the review pathway in Part 4.

Certificate application: An eligible person must apply to the Secretary in the approved form (section 11). If satisfied the person is eligible, the Secretary issues the entitlement certificate.

Post-2008 cutoff: No new entitlement certificates may be issued after 1 July 2008 (section 12(1)(g)). This is the hard legislative cutoff that ended new entrants to this scheme.

Loan increase application timing: Applications from former members who have resigned, retired, or been discharged must be made within two years of separation (section 14(3)). This time limit does not apply to operational service members under section 3A(1) (section 14(3A)).

Subsidy period: The length depends on completed years of subsidy service, calculated at the time subsidy is being paid. For a standard member, it is the lesser of actual completed service years and 20 years (section 23(3)).

Surviving spouse continuity: If a borrower dies and the surviving spouse or de facto partner satisfies the conditions in section 27(4) (inherits the house subject to the loan and occupies it as their home), subsidy resumes and continues for the remainder of the original subsidy period.

Annual report: Due as soon as practicable after each 30 June (section 39). The Minister must table the report within 15 sitting days of receipt.

Defence Service Homes Act 1918 (Cth): The foundational relationship. This Act covers non-DSH members only. DSH Act recipients are excluded from this Act's scheme. The boundary between the two schemes is drawn by the definition of "non-DSH member" in section 3 and the election mechanism under section 4BA of the DSH Act.

Defence Home Ownership Assistance Scheme Act 2008 (Cth): This Act closed new entitlements to the 1990 scheme from 1 July 2008. Subsidy under both Acts at the same time is prohibited (section 20A). The 2008 Act established the replacement scheme for new entrants. The Secretary's delegation powers under section 37 extend to delegates appointed under the 2008 Act, allowing a unified administration of both schemes.

Privacy Act 1988 (Cth): Section 36 deals with use and disclosure of personal information held under the scheme. The authorised purposes for sharing information include the Bank, loan providers under the 2008 Act, and credit providers under the DSH Act. Use or disclosure outside those purposes is not authorised by the Act and remains subject to Privacy Act requirements.

Family Law Act 1975 (Cth): The definition of "child" in section 3 cross-references the Family Law Act 1975 definition, capturing children born of certain relationship types who may be relevant to assessments of family home suitability.

Income Tax Assessment Act 1936 (Cth): The two stored tax cases address whether franchise fees paid by the Bank to the Commonwealth for exclusive rights under the scheme were deductible as revenue expenditure or capital expenditure.

Scheme closed to new entrants since 2008: Practitioners need to be aware that this Act applies only to persons who obtained an entitlement certificate before 1 July 2008. Any person who joined the Defence Force after that date and seeks housing assistance must go to the 2008 Act scheme instead.

$80,000 cap: The maximum amount on which subsidy is payable under section 21 is $80,000. This cap reflects 1990 property values. Borrowers with loans significantly above $80,000 receive subsidy only on the first $80,000. This makes the scheme less valuable in real terms than when it was introduced.

Occupation requirement is ongoing: The condition in section 20(2)(e)(ii) that the house must be used as the borrower's home is a continuing requirement, not just at the time of the loan. A borrower who moves out and rents the property risks subsidy cessation. This catches members who are posted interstate and temporarily cease to personally occupy the house.

Owner-only title: The house must be owned by the entitled person alone, or jointly with the spouse or de facto partner as joint tenants. Ownership by any other co-owner (including adult children or unrelated investors) breaks the condition in section 20(2)(e)(i).

Service period calculations are complex: Different service categories have different basic service period calculations, different entitlement period lengths, and different treatment of operational and warlike service. A member who was discharged and re-enlisted has a modified basic service period determined by a table in the definition of basic service period.

Subsidy cannot overlap with 2008 Act: A member who transferred to the 2008 Act scheme cannot reactivate this Act's subsidy, even if the 2008 Act entitlement is later cancelled. The disqualification in section 20A is permanent from the earliest day the 2008 Act subsidy became payable.

Standard career member: A member of the Australian Army who has completed six years of effective full-time service and never received DSH Act assistance applies for an entitlement certificate. The member satisfies the eligible person definition (paragraph (a) of the definition in section 3) and has completed the basic service period (five years). The Secretary issues a certificate. The member obtains a subsidised loan from the Bank for $75,000 to purchase a home. Subsidy is payable on the full $75,000 advanced amount (below the $80,000 cap). The subsidy period equals completed years of subsidy service, up to 20 years.

Discharged and re-enlisting member: A member is discharged after 12 years because of a compensable disability, and re-enlists within two years. The basic service period remaining is four years (from the table in the definition of basic service period, for a member who completed 12 years before discharge). Once that four-year period is completed after re-enlistment, the member becomes an eligible person under paragraph (b) of the definition and may apply for a certificate.

Surviving spouse: A subsidised borrower dies. The surviving spouse inherits the house under the will, takes the house subject to the loan, and continues to occupy it as a home. Subsidy is suspended during the transfer process but resumes under section 27(4) once the conditions are met. The spouse can continue the subsidised loan for the remainder of the original subsidy period.

Tax treatment of franchise fee (Avco Financial Services Ltd v FCT [1997] FCA 514): The Bank paid $42 million to the Commonwealth for the exclusive right to participate as lender under the scheme for 15 years. The Federal Court found that the character of this expenditure as capital or revenue depended on the nature of the advantage sought. The case did not concern borrower eligibility under this Act but reflects the significant commercial value the Bank placed on access to the scheme's borrower base.