Nick Minchin (SA, Liberal Party, Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

The coalition strongly supports the Defence Home Ownership Assistance Scheme Bill 2008 and the Defence Home Ownership Assistance Scheme (Consequential Amendments) Bill 2008. These bills in fact implement a very significant coalition policy commitment to establishing a new scheme to provide financial assistance to members of the Defence Force for the purchase, maintenance and development of their homes. We are very pleased that these bills have finally made it onto the floor of this chamber for debate. We strongly support this measure and the commencement date of 1 July. We acknowledge the strong support for this measure by many defence personnel and their families. It is a package which will allow ADF personnel to have access to a more appropriate method of home loan assistance that more appropriately reflects the requirements of ADF service in 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 Owners Scheme to serving members who have not yet exercised their rights under that scheme. The bills will allow for the transition of eligible persons into the new scheme. The new scheme, as announced by the former coalition government in 2007, is much more contemporary and generous than the previous scheme, and we do welcome the new government’s adoption of this coalition initiative. The bill implements a 2007 decision of the former government aimed at increasing rates of retention in the ADF. In 2006 the Defence Force (Home Loans Assistance) Amendment Bill extended the life of the Defence Home Owners Scheme by 12 months to allow Defence to conduct a review of the scheme. The objective of the review was to look at the scheme and examine options for a revised scheme that would: support recruitment, retention and resettlement; recognise the benefits homeownership provides to both members and Defence; and be cost-effective for Defence. In the 2007 budget the former coalition government announced the response to that Defence review and provided additional funding of $864 million out to 2016-17 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 this year while legislation to implement the 2007 budget decision was prepared. It was the former coalition government’s desire that the new scheme come into operation by 1 July 2008, but of course legislation to that effect was being drafted when parliament was prorogued. We are pleased that the Labor Party supported this measure in opposition. This bill in fact reflects the original announcement made by the former coalition government. I agree with my colleague in the House of Representatives Mr Bob Baldwin, who said:

... I think it is important for information about this scheme to be clearly ... communicated with 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.

Ultimately, the decision to take on a home loan or change home loans is a big financial decision for any individual or family, including those in the ADF. Financial decisions of this nature require an analysis of their impact on the family budget and disposable incomes over the life of the loan. So these are big decisions. Implementing this new scheme, Defence and the government will need to ensure that families have access to the information they need to make an informed decision.

The bill provides that there will be a review of the scheme after four years, with Defence reporting on the outcome of the review, for consideration in the context of 2012-13 budget deliberations. We would suggest to the government that they provide updates on the operation of the scheme earlier than year 4, when the review will occur, including an examination of the impact of the critical retention points and the operation of the scheme overall. We believe that should include qualitative as well as quantitative advice on satisfaction with the scheme by ADF personnel and their families, particularly on the ease of understanding the scheme’s operation. I want to take this opportunity to commend the work of the Defence Families association. They have been very strong in their advocacy and support for this measure and have been, of course, very keen to see it come into effect on 1 July this year.

In the other place, the shadow assistant defence minister, Mr Bob Baldwin, moved a second reading amendment that called for the government to consider amending the bill to give access to the maximum subsidised loan entitlement to the surviving partner of a member of the Defence Force who has died in warlike service. May I say, contrary to the allegations of the Minister for Defence, the opposition’s amendment was entirely in accordance with the standing orders, and that was confirmed by the House clerks. We are disappointed that the government has not seen fit to support what we think is a very good amendment. But, in the interests of getting this bill through so that the scheme can commence on 1 July, we will not be moving that amendment in the Senate. However, we urge the government to consider a subsequent amendment to the scheme to incorporate our suggestion. Defence families want to see this bill in place, so we will not be doing anything to delay it in any way. We are very pleased that defence personnel will have access to the scheme—a scheme that the coalition announced last year. We look forward to ADF families utilising the subsidy and we look forward very much to this scheme having a material impact on retention rates in the ADF. I commend the bill to the Senate.

Andrew Bartlett (Queensland, Australian Democrats) Share this | Link to this | Hansard source

The Democrats support the Defence Home Ownership Assistance Scheme Bill 2008 and the Defence Home Ownership Assistance Scheme (Consequential Amendments) Bill 2008. I want to make a few comments on the content of it and some broader issues. Senator Minchin in his contribution mentioned the stance the coalition took in the House of Representatives in seeking to get the government to consider modifying the bill. I appreciate the reasons he gave for the coalition not pursuing that via an amendment here. Obviously, if they had it would have passed, because they have the numbers here. But these matters are always matters for judgement, and I certainly recognise that the desire to just get the scheme up and running by 1 July is a valid one. Some of the differing views about how it could perhaps be finessed further can be considered as part of the review of the scheme down the track. The issue that Senator Minchin mentioned that the coalition was pursuing is about whether or not it could be ensured there would be automatic eligibility for the surviving partner of a Defence Force person who died in warlike service to have access to the maximum subsidised loan entitlement.

I want to note the views of the Injured Service Persons Association, who wrote to me—I think they would have written to all the ministerial and shadow ministerial spokespersons on this issue. They spoke about their support for this broader issue but also raised an issue of ongoing concern for that association—that there is different treatment depending on whether or not a spouse survives a person killed in warlike situations or other situations. They make the point about the desirability of ensuring that eligibility criteria are such that support is made available to surviving spouses not just for warlike service but also for peacemaking services and service declared as hazardous. I know that is a view that is not universal by any means amongst defence personnel, veterans and ex-service organisations; that is an ongoing debate. But in my view there should be wider recognition, whether people are injured or killed, beyond those in warlike service. People who join the defence services do not have a lot of say about where they are deployed. You can be in extremely hazardous situations just training for military action or military service. Regardless of whether or not you end up in a warlike zone or warlike service, you are still at risk—you are at risk of severe injury, you are at risk of being killed. In those circumstances, it is my personal view that, when that injury or fatal incident occurs, trying to create a distinction between warlike service and other types of service is not reasonable, at least in regard to entitlements for surviving spouses and families.

Given that this is probably the final time I will speak on defence personnel and veterans related legislation as a member of the Senate, I would like to note all of the work of the range of ex-service organisations. I have particular admiration for the work of the Injured Service Persons Association in trying to get the often neglected views of their members and people in those circumstances given greater consideration. I hope in the review of this scheme their views are given wider consideration by the government and by all the people engaged with this issue.

It would be remiss of me not to note that with both this legislation and indeed the previous legislation that was debated half an hour or so ago, the veterans entitlements legislation, there is the continuing issue of discrimination against people whose partner is of the same sex. We had a reasonable amount of debate on the issue of same-sex couples in this chamber earlier this week, and I know the government has put on the record its intention to bring forward wide-ranging legislation in response to the Human Rights and Equal Opportunity Commission report on discrimination against same-sex couples. So, whilst many times in the past I, and other Democrat senators, have moved amendments to address what I believe is an ongoing injustice, I will not do so on this occasion. We have rarely been successful with those amendments but, given the nature of commitments about legislation to be introduced soon, and given that we have already canvassed the issue on a broader scale in debate in this chamber earlier this week, I will not push it by way of formal amendments. But I would simply make this point and remind senators and others in the community that this discrimination reaches into a huge range of Commonwealth law and a huge range of entitlements that are denied to people purely on the basis of the gender of their partner if they are in a same-sex relationship. When you are particularly talking about a measure that is aimed at creating greater incentive for retention of personnel in the defence forces, such discrimination really does not make much sense. It undermines the intent of measures like this.

It is very important that we look for ways to improve retention—and indeed recruitment in the first place—of people in the defence forces, and if you have a group of Australians who are discriminated against, purely on the basis of their sexuality or on the basis that their partner is of the same sex, then you undermine the goal of retention. I think from that point of view alone, let alone the issue of basic justice and fairness, it makes sense to remove this discrimination. This is a new scheme, as Senator Minchin has pointed out, so I think it would have been quite appropriate to have ensured that as this new scheme operated discrimination did not occur. This is particularly so when you are talking about a situation where a surviving spouse may have eligibility for ongoing entitlements, given that you are talking about a circumstance where a person’s partner gets killed in the service of country, which is obviously enormously traumatic. That is traumatic for everybody and particularly so for the family. That is particularly traumatic for the spouse. So it is equally important that one group of spouses get not just the subsidy but also the recognition. It is not simply a matter of another group of people wanting access to the subsidy; it is a matter of their having recognition of the validity of their relationship at a time when that relationship has ended in the most traumatic way. So it is a real imperative that this discrimination be removed as soon as possible, and I do urge the government to move on that.

The only other comment I would make is on the wider issue of access to housing. My understanding of one of the reasons behind this new measure being brought in, given that the nature of assistance provided to defence personnel with regard to housing is being updated, is the changing nature of the housing market and indeed the creation of problems to do with housing affordability as well as some of the specific issues that apply to people in the Australian Defence Force. I do not want to go into the whole issue of housing affordability more broadly, but I would say that as a general principle these days I do not support, and the Australian Democrats do not support, interest subsidies as a way of enabling people to afford a home. But the context of this measure is as much about an incentive to improve retention because, as I understand it, the scheme increases in value and the incentive improves the longer people remain in active service, so they get progressively higher levels of benefits after extra years of service. I think the higher levels come into effect at the eight-year and 10-year marks for permanent members of the Defence Force and 12-year and 16-year marks for people in the reserves.

Clearly, given those circumstances, you have a mechanism that provides a real incentive for people to stay in the Defence Force—and that is a real issue. In that context I think it is valid to provide a mechanism like this, but I do want to put on the record that that does not mean that I or the Democrats think that it is a good general policy to deal with the difficulty of affording a home by subsidising home interest rates or the interest payments of home buyers. I think that would be immensely inflationary, with a further distortion of the market. It would cost a lot of money and would be economically irresponsible and non-conservative. Therefore I certainly do not think that sort of measure should be applied, although I know the government has not signalled any intention to do so.

We do support the legislation and we do welcome in particular the intent of it. I have spoken a number of times in this place about the importance of working harder on the retention of defence personnel. This is one of the ways of doing it. Another is ensuring, when they do get harmed, injured or wounded, that they are given the best treatment possible. I think we have had improvements in that area as well in recent years but we do have some way to go, so I urge that those efforts to improve performance in that area continue.

Ruth Webber (WA, Australian Labor Party) Share this | Link to this | Hansard source

Mr Acting Deputy President Bishop, seeing that you are now occupying the chair in this chamber I seek leave on your behalf to incorporate in Hansard your remarks on the Defence Home Ownership Assistance Scheme Bill 2008 and related bill.

Leave granted.

Mark Bishop (WA, Australian Labor Party) Share this | Link to this | Hansard source

The incorporated speech read as follows—

This bill has been a long time in gestation. In the past couple of years we have seen the current, inadequate scheme extended a number of times. The scheme has been administered by Defence Housing Australia, previously the Defence Housing Authority, with funds provided by the National Australia Bank. It should have been replaced years ago. There are two reasons for saying this: firstly, the loans available that attract any subsidy are limited to $80,000—which means the balance of any home loan or indeed any second mortgage is obtained at market rates. Secondly, there is currently only one provider of loans under the scheme and that is the National Australia Bank. Information available indicates that of the 50,000 ADF personnel - only 4,500 current serving personnel have taken advantage of it. No doubt some have chosen to borrow elsewhere without taking advantage of the subsidy.

It is obvious that many defence force personnel and their families prefer to rent. That too is attractive given the generous level of subsidy available, and good quality rental housing is now provided by DHA. It can also be said that properties surrounding some Defence bases are not always an attractive investment propositions. In remote areas of course there may be no investment opportunities at all. In others, it simply might not be a sensible investment option due to low rates of capital gain, not to mention the constant disruption of buying and selling in short time frames because of 2 to 3 year posting rotations. Indeed that problem will also apply to the new scheme. However, for some a property purchased in a good locality may become an investment property for the future, as properties purchased with a subsidy can be rented out after one year of occupation. And I understand this has occurred. However, the subsidy will then become taxable. Although, with a capital gains tax exemption. Rental subsidies can then be accessed as normal.

We should be encouraging a higher level of home ownership among ADF personnel. Home-ownership is enjoyed by 70% of the Australian population, but denied ADF people. It is effectively denied, not because ADF families are unable or unwilling to work towards home-ownership but because of frequent postings, the volatile nature of the property market in many of places where bases are located, it makes the decision to purchase difficult. By contrast, there is a high standard of subsidised rental housing. Home ownership might not seem worth the trouble.

The difficulty with the new policy is that some of those qualifications remain—but more on that shortly. Let me describe the key features of the new scheme. The new scheme is in fact much more than a home ownership scheme. It will also compliment the Government’s, retention programs. This is because the subsidy available to those borrowing for their own home will progress in 3 stages. These steps align with the major points in a career when people are shown to resign. That is, at the 4, 8 and 12 year marks. At each stage in this new scheme, the level of borrowing which attracts the subsidy of 37.5% or interest paid increases. While no subsidy is available in the first 4 years of service, it will come into effect at a time when young recruits are contemplating their future career path. And so the scheme will provide an added and generous incentive for them to continue their career in our Defence forces.

Not only is it a genuine and generous home ownership scheme; it will make an attractive recruitment tool. I would like to talk briefly on the generous nature of the new scheme. At the first stage of 4 years the maximum borrowing attracting the subsidy of 37.5% on an amount of just over $187,000. This equates to approximately 2% less than current market interest rates. This is 40% of the national weighted average house price and the value of the subsidy on that amount is $350.00 per month. At the 8 year point the limit attracts subsidy increases to 60% of the average house price, or around $280,000. The value to eligible personnel is $525.00 per month. At the 12 year point it goes to 80% of the average house price or $374,000—and an allowance value of $700 per month. Given that the current interest payable on a mortgage of $230,000 is about $1600 per month—this is a significant allowance. The applicable rate of interest on which the subsidy is based will be set at the median interest rate applicable on or after the 1st July. That is when the new scheme becomes operational. It should be noted that interest rate rises above that level will not be subsidised, but falls in interest rates will result in a decrease in the subsidy.

Overall this scheme entails an entitlement lasting 20 years. For those with war-like service, that period increases for maximum of a further 5 years. Of course that will depend on the accumulated war-like service. This is an entitlement translated from the current scheme. For reservists the benefits are the same except that the service periods will progress at 8, 12 or 16 years. Provision is made for the reservists who perform continuous full time service, and their entitlements will be advanced accordingly.

The other key factor of this scheme is that the benefit accrues to ADF personnel, even if they might not immediately take advantage of it. Provisions are made in the bill for entitlements to be cashed out providing that amount is used to purchase a home. Unlike the current scheme administered by DHA with National Australia Bank as the sole provider, this scheme is to be administered by the Department of Veterans’ Affairs. The decision was taken after a public tender. Rather than one single provider there will be 3—also decided following an open public tender. Obviously 3 is better than 1 - but of course the obvious question is why not an open market? I understand this decision to set a limit on number of providers was made by Dr Nelson the previous government’s Minister for Defence. The 3 providers chosen are NAB and the two Defence Credit Unions.

Whether a broader market model might have been closer is a moot point. Any changes will entail another tender process and therefore lead to a delay in the introduction of the new scheme. Clearly the restriction of the market to 3 providers provides limited choice and it also guarantees a larger guaranteed market for the 3 providers. This we are told reduces the administrative burden in reconciling payments, but in turn no doubt assists a healthier revenue stream back to the Commonwealth through franchise fees. Franchise fees of this nature have attracted some controversy in that they are seen as exploitive. In fact, such fees seem to be part of the market. And given that the taxpayers are providing a healthy parcel of business it would seem to me to be smart. To the extent that there is significant income stream to the Commonwealth, it might also be said that this enables the level of subsidy provided to be more generous.

Mr Acting Deputy President that in a nutshell is the new scheme. It will be very interesting indeed to see the effect it will have on retention rates over the coming years. In fact given the current level of retention bonuses, salary reviews and all other allowances, it is very clear that we value the experience and expertise of our serving personnel. This new scheme is a part of the current policy matrix. We must also consider the other incentives available. Firstly, there is the Defence Home Purchase Scheme. It provides a $15,000 taxable grant to ADF first home buyers. This grant is on top of the $7,000 first home buyers’ scheme available to all Australians first home buyers. An added bonus for Defence force families is that all current homeowners, who are posted and decide to sell their house and buy another, have all their costs reimbursed. That is conveyancing costs, legal fees, stamp duty as well as agents fees.

Mr Acting Deputy President, as I said earlier, this is a significant and forward thinking housing policy, and I am sure it will pay dividends in the retention rates of our valued and valuable defence force personnel. Whereas previously it was said that renters had an advantage over ADF home buyers, that balance has certainly been redressed. The retention aspects of this policy will build on existing allowances and bonus schemes. In short the longer one serves, the higher the income, and the greater the borrowing the larger the subsidy. As young men and women continue their career in the forces and as they start to build their own families, the new housing scheme will grow to meet their needs. I do note however, the government has put a 5 year sunset clause on this scheme pending a review after the first four years. It would be my hope that the effectiveness of the scheme as a retention tool is closely examined, along with the broader housing policy.

I’d also like to address the administration of this new scheme. While we are not privy to the details of the tender documents, I find it extraordinary that the current specialised provider of Defence housing, DHA, has been passed over in favour of the Department of Veterans’ Affairs. You would think that DVA has little experience in housing. However it appears that the DVA tender was far superior to that submitted by DHA. So my question is why did DHA get it so wrong? Why was their tender document apparently inferior to that of DVA? What is the future for Defence Housing Australia if they are unable to tender successfully for a program that would be considered ‘core business’, against a competitor with limited or no experience in housing? Put simply, DHA is the agency that provides and maintains housing for Australia’s Defence force personnel. Yet despite their carriage of the original housing subsidy scheme DHA appears not to have the expertise to successfully compete in an open public tender for the new scheme.

It will also be interesting to see how the Department of Veterans’ Affairs responds to their new function and what the changes will mean to their role in the future. Clearly there is currently a lot of overlap in the arrangements for the provision of services to serving and ex-service personnel. But in terms of service delivery and accountability this arrangement does question the effectiveness of Defence Housing Australia.

I support the bill, and I know that ADF personnel have been waiting keenly for this for some time. As I have said, this new housing policy, I believe will make serving personnel consider continuing their career in our forces. I am sure some may be amazed at the generosity of this package, with a question as to what the total package of ADF salary and allowances are. I have no quibble with paying what’s needed to retain people in a very competitive labour market, and this new scheme will enhance the remuneration packages available to our Defence forces.

I support the bill.

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

I thank Senators Minchin, Bartlett and Bishop for their contributions. I acknowledge, once again, Senator Bishop’s important role in our policy development and consideration of this legislation. This legislation has been a long time coming, given the scheme it replaces has been extended twice in recent years. There is no doubt the old scheme was completely deficient; hence the willingness of the Rudd government, when in opposition, to endorse what was the previous government’s budget decision of 2007-08. We have bipartisan agreement on this legislation. We believe it important, as indeed the Rudd government believe it is important in respect of all the promises they gave, to honour our commitments. We are doing so promptly. The new scheme is an appropriately generous scheme, aimed primarily at the retention of experienced ADF personnel. It will be welcomed by those personnel and their families, and I acknowledge the contribution that Senator Minchin made to the defence families association.

There is a commitment to review after four years of operation. The government are sensitive to the fact that, as I said, promises need to be honoured. We do need to pass this legislation without further delay. The review will facilitate consideration of other matters that have been raised in the debate and were raised in the lower house. I commend the bills to the Senate.

Question agreed to.

Bills read a second time.