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Wednesday, 18 March 2009
Page: 3031


Mr SNOWDON (Minister for Defence Science and Personnel) (9:44 AM) —I move:

That this bill be now read a second time.

The purpose of the Defence Legislation Amendment Bill (No. 1) 2009 is to make amendments to address two separate measures.

The first measure will amend the Defence Act 1903 to introduce a Tactical Payment Scheme (TPS). This scheme will provide a new, efficient and effective means for making expeditious no-liability payments to persons who suffer damage, injury or loss due to Australian Defence Force (ADF) activities abroad.

The TPS was developed in response to lessons learnt in ADF operations in Iraq, Afghanistan and East Timor. The scheme is an acknowledgement that, in many areas in which the ADF operates, the expectation of financial compensation for collateral damage to property, injury or loss of life is often a common aspect of local cultures. Respect for and recognition of such customs is vital for building relationships with these local communities, which in turn enhances the safety and security of our deployed ADF personnel.

At present, payments of this nature can only be made by the government under the act of grace provisions in the Financial Management and Accountability Act 1997 (the FMA Act). These provisions provide for payment to be made in circumstances where the government is not legally liable for the damage caused by ADF members but accepts some responsibility to recompense the individual affected by that damage.

Defence greatly appreciates the support provided by the Minister for Finance and Deregulation, who is responsible for considering and approving act of grace payments. Nonetheless, our experience in East Timor, Iraq and Afghanistan has shown that the administrative requirements involved in making an act of grace claim make that system unsuitable for use in operational environments. This is particularly true in situations where expeditious payments are appropriate and most effective. Even small delays in making payments can have a negative impact on relations with the local community and therefore on the security and protection of ADF personnel deployed overseas.

The TPS is a Defence specific, discretionary mechanism that does not preclude Defence from having recourse to the act of grace provisions in the Financial Management and Accountability Act 1997 (the FMA Act).

The scheme will allow for expeditious payments to be made in overseas operations and will operate independently from the act of grace payments provisions and be managed and operated by Defence.

The second measure amends the Defence Home Ownership Assistance Scheme Act 2008, which provides a legislative basis for the operation of the Defence Home Ownership Assistance Scheme (DHOAS). The DHOAS was introduced on 1 July 2008 as one of a number of initiatives designed to improve current ADF recruitment and retention rates. The scheme encourages retention by providing increased assistance as a member passes specified career points. The assistance available under the scheme is also provided in recognition of the difficulties ADF members may have in purchasing a home due to the nature of their careers.

The DHOAS provides eligible ADF members with home ownership assistance that reflects the contemporary housing and home finance markets. The scheme is responsive to changes in the housing market and provides flexibility and choice to ADF members through a panel of home loan providers.

Since being introduced, the DHOAS has generated much interest in the ADF community. As at 28 February 2009, the scheme administrator, the Department of Veterans’ Affairs, had issued 11,255 subsidy certificates to eligible ADF members. Of these ADF members, 5,197 had commenced receipt of the subsidy assistance on taking up a mortgage provided by a member of the home loan provider panel. ADF member feedback indicates that the DHOAS is having a positive influence on retention.

While the introduction of the DHOAS has been successful, the scheme administrator has highlighted a number of unintended outcomes inconsistent with the initial policy intent. Accordingly, the bill will address these unintended outcomes.

The bill will remove the unintended windfall gain in the eligibility and entitlement of members who rejoined the ADF after a break in service prior to 1 July 2008. This measure will ensure that members who rejoined the ADF prior to 1 July 2008 are provided with the same eligibility and entitlement as those who rejoined after this date. The change primarily affects members with reserve service or combined permanent and reserve service who have had a break in service of between two and five years prior to 1 July 2008. This bill will also clarify that ADF service performed before a break in service of greater than five years is not considered to be effective for the purpose of calculation of a member’s eligibility or entitlement. Importantly, these changes will not be retrospective. This will ensure that members who have been advised of an entitlement based on the previous provision, by being issued with a subsidy certificate, do not suffer detriment.

The second unintended outcome is in relation to subsidy certificates where that certificate can be issued even if the member has exhausted their service credit and cannot receive a subsidy payment. This undermines the reliability of the certificate as evidence for home loan providers that a member is able to receive a subsidy on the loan provided. Furthermore, the certificate does not expire if the recipient ceases to hold a service credit and has no reasonable prospect of accruing further credit because he or she is no longer a member of the ADF. This will be addressed by the bill to ensure greater reliability of the subsidy certificate as evidence to a home loan provider that a subsidy is payable by making the issue of a subsidy certificate conditional on a member having a service credit, and making the certificate to stop being in force where the holder is not a member of the ADF and ceases to have a service credit. Importantly, no person will be disadvantaged by these changes.

The bill also makes amendments to ensure that only those members who are buying a home for the first time while a member of the ADF will have access to the subsidy lump sum payment option, that the subsidy may be payable either monthly or as a lump sum payment plus monthly payments, and that members who access the lump sum payment option retain sufficient service credit to support ongoing monthly subsidy payments.

The bill makes changes to the treatment of shared liability for a loan to bring the legislative scheme in line with the original policy intent of the DHOAS. The entitlement of a subsidised borrower who enters into a joint loan with a person who is not defined as a ‘partner’ in the Defence Home Ownership Assistance Scheme Act 2008 is calculated proportional to the subsidised borrower’s liability. The amendments also clarify the entitlements of partners who are both subsidised borrowers in respect of the same loan, including entitlements on the death of one of the partners, allowing partners together to maximize the amount of subsidy payable in respect of a loan to which they are both parties. These measures establish a consistent framework for calculation of subsidy where there is more than one party to a loan.

Lastly, the bill makes a minor amendment so that the scheme administrator may be delegated the secretary’s function to provide written statements of reason for a decision that may be reviewable, including information about the affected person’s rights. This will allow the responsibility for notification of review rights to be placed upon the delegate who has made a reviewable decision under the act. I commend the bill to the House.

Debate (on motion by Mr Lindsay) adjourned.