Bob Baldwin (Paterson, Liberal Party, Shadow Minister Assisting the Shadow Minister for Defence) Share this | Hansard source

From the outset, let me make it abundantly clear that the coalition supports the Defence Home Ownership Assistance Scheme Bill 2008 and the Defence Home Ownership Assistance Scheme (Consequential Amendments) Bill 2008 and welcomes their consideration by the House today. These bills implement an important measure to establish a new scheme to provide financial assistance to members of the Defence Force for the purchase, maintenance and development of their homes. The coalition is pleased these bills have finally made it to the floor of the chamber. After all, the House has been sitting for nearly seven weeks now and an earlier introduction would have reduced the pressure to have had these bills passed by 1 July in both houses.

The coalition strongly support this measure and the scheme commencing on 1 July 2008. After all, this was a Howard government initiative proposed in the 2007 budget. Ideally, we would have liked to have seen the detail of the final legislation earlier, and I have to ask the question: why the delay when the funding was allocated in the 2007 budget and the Rudd government has had six months to prepare the legislation? Given the urgency to have this legislation passed by both houses to enable the scheme’s commencement by 1 July, why was there a delay in providing the detail? But, knowing the importance of this measure, I have been seeking updates and further information from the minister frequently. We are as keen for the ADF members to have access to this new scheme from 1 July as the ADF members themselves.

The government have been tardy in their management of this legislation’s process. I note, for example, a letter addressed to me from the Minister for Defence Science and Personnel seeking the coalition’s consent for the signing of contracts to allow the successful tenderers at least eight weeks to transition prior to the 1 July 2008 implementation date. This letter was dated 21 April. The final paragraph of that correspondence says:

Should you have any comment on the proposal I would be grateful if you could provide it to me by 17th April 2008 as Defence needs to sign the contracts in the week commencing 21st April 2008.

I know that I am effective as the opposition spokesperson on these matters, defending our fine serving men and women. But, Mr Deputy Speaker, it is unreasonable and you would be right in saying that it would be impossible for me to deliver on this government’s demand for a response four days prior to the letter actually being signed by the minister and, further, to actually receive the letter on the day the contracts are scheduled to be signed.

This lethargic and tardy attitude by the government has been less than helpful for the work of the House and the facilitation of passage of this legislation through the House. Despite this potentially being a truncated debate in the parliament to ensure timely passage, I called on the department to keep me informed of the progress of the drafting of the legislation and the relevant tender processes that have already occurred.

The coalition acknowledges the strong support of this measure by the many defence personnel and their families. It will allow ADF personnel to have access to a more appropriate method of home loan assistance that more appropriately reflects the requirement of ADF service and the current housing market. It is important to note that a range of other housing and assistance measures will continue but that these bills close the former Defence Home Owner Scheme to serving members who have not yet exercised their rights under the scheme. The legislation will, though, allow for the transition of eligible persons into the new scheme. The new scheme, as announced by the coalition in 2007, is more contemporary and more generous than the previous scheme, and we welcome the new government’s adoption of this coalition-initiated measure.

Firstly, I want to put on the record the history of this measure. The legislation implements a 2007 budget decision by the former coalition government that aimed at increasing the rates of retention in the ADF. In 2006 the Defence Force (Home Loans Assistance) Amendment Bill extended the life of the Defence Home Owner Scheme by 12 months to allow Defence to conduct a review of the scheme. The objectives of the review were to look at the scheme and examine the options for a revised scheme that would support recruitment, retention and resettlement, and recognise the benefits that home ownership provides to both members of defence and its cost-effectiveness for Defence.

In the 2007 budget the coalition announced its response to the Defence review into the scheme and funding of $864 million through to the year 20016-17 in the form of a home loan interest subsidy to involve progressively higher subsidy assistance to ADF members who serve beyond critical retention points. In 2007, amending legislation was passed extending the life of the current scheme until 30 June 2008 while legislation to implement the 2007 budget decision was being prepared. The coalition also wanted this new scheme to come into operation by 1 July 2008 but legislation was being drafted when the parliament was prorogued.

Labor supported this measure in opposition, and this legislation reflects the coalition’s original announcement. Let me make it clear yet again: the coalition do support this legislation and its 1 July commencement date. In doing so, though, I suggest that there are a number of factors that need to be considered and that would benefit from ongoing monitoring.

Firstly, I think it is important for information about this scheme to be clearly and accurately communicated to ADF personnel and their families. It is important to make sure they are aware of the various fees imposed by their current financial institutions if they switch mortgages to take up this new subsidy scheme. These costs may be exorbitant for some, and I have been asked why it was restricted to only three providers. Let us hope that, in a review of the scheme, this can be broadened to allow greater access without penalty.

In light of the Rudd government’s decision to means-test the baby bonus and the family tax benefit B without a taper rate, these subsidies can affect families across other mechanisms of support. Defence will need to make sure its website information and proposed roadshow provide accurate information on the financial considerations in taking up this new scheme.

A decision to access the Defence Home Ownership Assistance Scheme will depend on members’ personal and financial circumstances. Members who delay taking up the assistance in an attempt to minimise the cost of transfer will not suffer detriment to their eligibility and entitlement, as they can retain a service credit in the DHOAS that may be used at a later date, including up to two years after leaving the ADF.

Ultimately, the decision to take on a home loan or change a home loan is a big financial decision for any individual or family. Financial decisions of this nature do require an analysis of their impact on the family budget and disposable income over the life of the loan. These are big decisions and, in implementing this new scheme, Defence and government will need to ensure that families have access to the information they need to be informed in their decision-making process. There are varying ranges of eligibility based on enlistment criteria. Regulars must have a minimum of four years continuous service; reserves, a minimum of eight years consecutive service of efficient service. Efficient service equals 20 days of reserve service per year. If a reservist has done any continuous full-time service whilst in the reserves, this reduces the eight-year waiting period. For full-time continuous service under six months, the waiting period reduces by one year. For full-time continuous service which is six months and over, the waiting period reduces by two years.

There are three tiers that apply to the scheme for both regulars and reserves. These are the figures provided to me by the minister’s office this week. For regulars, on a subsidised loan limit of tier 1, $187,159 after four years of service; tier 2, $280,738 after eight years of service; and tier 3, $374,318 after 12 years of service. For reserves, on a subsidised loan limit of tier 1, $187,159 after eight years of service; tier 2, $280,738 after 12 years of qualifying service; and tier 3, $374,318 after 16 years of service. The amount of subsidy assistance is provided up to, for tier 1, $350 per month on the subsidised loan limit of $187,159; on tier 2, $525 per month on a subsidised loan limit of $280,738; and tier 3, $700 per month on a subsidised loan limit of $374,318.

The value of the subsidy assistance is determined by the median interest rate, and this will vary in accordance with market fluctuations reflected by Reserve Bank official interest rate movements. In other words, as interest rates rise and fall, the value of the subsidy assistance will also rise and fall. Furthermore, subsidised loan limits may vary depending on what the ABS determines is the average house price. In other words, the subsidised loan limits will rise and fall as average house prices rise and fall.

The regulation supporting the operation of the DHOAS will set a cap on the median interest rate used to assess the DHOAS monthly subsidy amount. The cap will be set at the median interest rate applicable at the time the bill receives royal assent. The median interest rate as applies from time to time, or a formula to calculate the median interest rate, may be determined by the minister. Such a determination will be a legislative instrument and hence subject to disallowance. However, the median interest rate that is used in any given month to calculate the amount of subsidy shall be the lesser of the capped rate set by regulation or the rate set under a determination by the minister.

Accrual and payment of subsidies for regulars commences after completing four years of service. The subsidies will accrue on a monthly basis after this period if the member does not access the scheme. Accrual and payment of subsidies for reserves accrue at the end of each year of efficient service after the reservist has qualified as eligible—in other words, eight years. Therefore, the first payment subsidy received by an eligible reservist would occur at the end of the ninth year. The subsidies will accrue on a one year for one year basis if the scheme is not accessed when eligibility comes up.

For both regulars and reserves, and if the scheme is not used after a member becomes eligible, the subsidies will accumulate and the member can access them at a later date. The subsidies will accumulate for a maximum period of 25 years. A lump sum can be accessed from the accrual, the maximum of which is equivalent to four years of subsidies at tier 1 level only. In other words, you can have four years worth of subsidies as a lump sum but only at the tier 1 level. The reason it is at tier 1 level only is because the purpose of a lump sum payment is to assist members who are buying their first home whilst in service.

Other factors to be considered in this scheme are that members have to be living in the home they are receiving the subsidy for. How many other homes members may own or have a mortgage on is irrelevant. Members of the old scheme will be able to access the new scheme as long as they meet the criteria and, importantly, the scheme will be subject to fringe benefits tax, which will be paid by the department. Using the scheme does not exclude a member from accessing other benefits such as the First Home Owner Grant. Members who leave the ADF will have access to the scheme within two years of leaving the service, and conditions such as length of service will be determined on the various benefits.

It is important that schemes are reviewed. A review of this scheme will occur after four years with Defence reporting on the outcome of the review for consideration in the context of the 2012-13 budget deliberations. We call on the government to provide updates on the operation of the scheme earlier than year 4 by including an examination of the impact of the critical retention points in the operation of the scheme overall. This should include qualitative as well as quantitative advice on satisfaction with the scheme by ADF personnel and their families and particularly the ease of understanding the scheme’s operations. I suggest it might be useful to engage ADF Financial Services Consumer Council officers for some of the analysis ahead of year 4. Whatever mechanisms and bodies exist should be used to ensure the smooth take-up and operation of the scheme and its operation within existing housing allowances and assistance for ADF personnel.

I would also take this opportunity to commend the department and its drafters for their efforts with this legislation. This is a complex bill that has been a long time in preparation. We appreciate the time that has been put into the bill and also into the tendering process for the appointment of lending institutions and scheme administrators. As the minister has outlined, the Department of Veterans’ Affairs has been appointed as the scheme administrator and the National Australia Bank, the Australian Defence Credit Union and the Defence Force Credit Union as the panel of lending institutions. I also wish to commend the work of the Defence Families Association. They have been strong in their support for this measure, and I know they have been keen to see that this measure comes into effect on 1 July.

The coalition will keep a close eye on the subsequent variations via legislative instrument in relation to market indicators. We have asked the government to provide additional information via the question and answer sections of their website on the impact of variations in market interest rates so that families taking up this subsidy know exactly how the subsidy could change their monthly mortgage repayments. There will no doubt be questions about the qualifying service time, and there are a range of variants. It is important to note members of the permanent ADF are required to provide five years service to qualify for home ownership assistance under the Defence housing ownership scheme. Therefore, members joining the permanent ADF after 1 July 2003 will not be eligible for Defence home ownership scheme membership. All members joining after 1 July 2003 will automatically become eligible for the subsidy assistance under DHOAS on completing their four-year qualifying period. Access to the previous home ownership assistance schemes will not be available to these members.

Examples should then be provided to clarify the application of the DHOAS qualifying period for members joining the permanent ADF after 1 July 2003. An example is when a member joins the permanent ADF on 12 December 2004. This member will be automatically eligible for home ownership assistance under DHOAS on 12 December 2008—in other words, on the completion of four years of continuous service. Another example is a member joining the permanent ADF on 15 October 2003. In this case, the member will complete four years continuous service on 15 October 2007. By 1 July 2008 the member will have completed four years and nine months continuous service. Therefore, on 1 July 2008 this member will have satisfied the DHOAS qualifying period, and at that time will have accrued nine months subsidy period—in other words, credit—which will continue to accumulate until such time as the member buys a house and accesses the subsidy assistance. The current home owner scheme provides additional subsidy periods for members who undertake warlike service. They will also apply to DHOAS.

Additional subsidy periods for warlike service will continue to be available for up to five years additional subsidy. However, unlike the current scheme, the initial qualifying period will not be waived as a waiver would not be consistent with the retention focus of the new scheme. The additional periods of subsidy assistance that will accrue for which warlike service is performed are: not more than three months will attract two additional years of subsidy, more than three but not more than six months will attract three additional years of subsidy, more than six but not more than nine months will attract four additional years of subsidy, and more than nine months will attract five additional years of subsidy. This has the ability to extend the period of subsidy from 20 years to 25 years in mortgage repayments—something that was not made very clear by Defence when they briefed me on this subject. When a person and his or her spouse or partner are both serving members of the permanent ADF, they will both be entitled to the subsidy assistance available under the DHOAS. This was a provision available under the current DHOS and will continue to be available under the DHOAS. They can access the DHOAS jointly on a single home loan, or separately if they see fit.

I understand that Defence has developed a communications plan to inform and advise ADF personnel and to promote the new scheme. Part of this plan is a roadshow that will visit all Defence establishments across Australia between July and September 2008. The roadshow team will comprise a Defence contract manager, a representative from the scheme’s administrator, the Department of Veterans’ Affairs, and also a representative from each of the three home loan providers. I would urge all defence personnel to visit the roadshow when it visits their area and have questions prepared for the team on this scheme. I would further encourage anyone considering joining the Australian Defence Force to go along to the roadshow as this scheme provides a further incentive for them to join our regular or reserve forces.

The coalition will be closely monitoring this measure and, more broadly, will hold the government to account if there is any negative impact on ADF personnel because of the Rudd Labor government’s renewed penchant for means-testing and increased taxing. The coalition is also concerned to ensure that the maximum not the minimum protection for surviving partners is provided in the event of a service-related death under this scheme. As such, I move:

That all words after “That” be omitted with a view to substituting the following words:“whilst not declining to give the bill a second reading, the House:

(1)

regrets that the bill does not create automatic eligibility for the surviving partner of a member of the Defence Force who has died in warlike service, to have access to the maximum subsidised loan entitlement; and

(2)

calls on the Government to amend the bill to remedy this defect”.

I put forward this amendment in the hope that the government will support the coalition in strengthening protections for the widows and their families of those killed in warlike service. If supported by the Rudd government, this amendment will extend to the maximum period and the maximum subsidy that applies to the surviving partner, regardless of their period of service. I move this amendment in support of those brave personnel who have made the ultimate sacrifice for this country in order to protect and secure the future of their families. It provides for greater peace of mind for those engaged in service in warlike zones. This amendment will directly support the surviving spouses of Defence personnel who have been killed in the past 12 months on operations. Those are: Trooper David Pearce, who was killed by a roadside bomb in Afghanistan on 8 October 2007; Sergeant Locke, who died in combat in Afghanistan on 25 October 2007; Private Ashley Baker, who was found dead in Dili, East Timor, on 5 November 2007; Private Worsley, who died in combat on the night of 22-23 November 2007; and Lance Corporal Jason Marks, who was killed in combat in Afghanistan on 27 April 2008. I call on the government to adopt this amendment. This is a relatively minor cost measure that, on a budget of $846 million for the scheme, would appear insignificant.

In closing, may I once again stress that the coalition want this legislation passed so that the new scheme can commence on 1 July. We are pleased that Defence personnel will have access to the scheme. The coalition initiated this measure. We look forward to ADF families utilising this subsidy and, subsequently, retention rates in the ADF increasing. There is one point that I would raise. In my capacity as the shadow minister for Defence science and personnel, I work with a committee of backbenchers—our policy committee. This Friday, it was my intention to visit the RAAF Base East Sale to meet with members of Defence and their families, and for my policy committee to do the same. I have been given approval to visit the base and undertake meetings. However, the policy committee of the backbench—the people who work on issues such as this—have been denied access. So, what opportunities do those members of this parliament as individuals or as members of a policy committee have to ascertain the thoughts, views and contributions of those in our Defence force and their families if the minister blocks their attempts to go to the base? The minister said that the opportunity is there for the Joint Standing Committee on Foreign Affairs, Defence and Trade to visit, but I would ask the minister to reconsider. These are not only members of a policy committee but also individual members of parliament with a right to obtain information for the purposes of conducting the business of this House. We support this legislation. We urge the government to adopt our amendment and we ask the minister to provide access for all members of parliament to visit Defence installations.

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