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Defence Legislation Amendment (Miscellaneous Measures) Bill 2020

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2019-2020

 

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

 

 

 

DEFENCE LEGISLATION AMENDMENT

(MISCELLANEOUS MEASURES)

BILL 2020

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

(Circulated by the authority of the

Minister for Veterans and Defence Personnel,

the Honourable Darren Chester MP)



 

DEFENCE LEGISLATION AMENDMENT

(MISCELLANEOUS MEASURES) BILL 2020

 

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.



 

STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

 

Defence Legislation Amendment (Miscellaneous Measures) Bill 2020

This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .

 

Overview of the Bill

1.                   This Bill contains 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 (Schedule 1); 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 2).

 

Schedule 1: Defence Home Ownership Assistance Scheme Act 2008 (DHOAS measure)

Overview and background to the measure

2.                   The amendments will increase the period during which an ADF member who leaves the ADF can access the home loan subsidy under this scheme. Currently, veterans who have completed sufficient service to be eligible for the subsidy must apply for a subsidy certificate within two years of leaving the ADF. A subsidy certificate is in force for a maximum of 12 months, and former ADF members are unable to apply for a second certificate. The practical effect is that veterans must have applied for the subsidy certificate within two years of leaving the ADF, and generally have purchased a home with an eligible home loan within three years of leaving the ADF.

3.                   Given the significance of the transition process for ADF members moving into civilian life, this is not always enough time for veterans and their families to consider all of their options in relation to purchasing a home. Extending the period for applying for a subsidy certificate from two years to five years means that veterans and their families will not be rushed into making this important decision.

 

 

Human rights implications

4.                   This measure promotes the right to an adequate standard of living in Article 11(1) of the International Covenant on Economic, Social and Cultural Rights (ICESCR), in particular as it relates to housing. The amendments expand access to the Defence Home Ownership Assistance Scheme, which provides a subsidy for serving and former ADF members to enhance their capacity to purchase a home. The amendments increase the time during which members who have left the ADF can access the scheme, so that more members are able to take up the subsidy.

Conclusion

5.                   This Schedule is compatible with human rights because it promotes and advances the right to an adequate standard of living, and does not otherwise engage any human rights.

 

Schedule 2: ADF Superannuation Act 2015 and Superannuation Industry (Supervision) Act 1993 (ADF Super measure)

Overview and background to the measure

6.                   Since 1 July 2016, ADF Super is the default superannuation fund for Permanent ADF members and Reserve members rendering continuous full-time service. For members who joined the ADF since that date, Defence makes contributions to ADF Super (or an alternative superannuation fund chosen by the member) at 16.4% of their salary. ADF members who are members of the older defined benefit schemes may also choose to become ADF Super members.

7.                   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. The intention is to open up ADF Super so that, when ADF Super members leave the ADF, they can continue to make contributions to the fund. While this change will take effect through changes to the AFD Super Trust Deed, the amendments to the ADF Superannuation Act 2015 clarify that these changes can be made.

8.                   Due to the difficulty in obtaining insurance for serving ADF members for death and permanent incapacity, the ordinary requirements in the Superannuation Industry (Supervision) Act 1993 for superannuation funds to obtain this type of insurance does not currently apply to ADF Super. The Bill includes amendments to that Act to ensure that ADF Super obtains relevant insurance for ADF Super members who are no longer serving ADF members.

9.                   These amendments increase superannuation choice for ADF Super members when they leave the Permanent ADF.

Human rights implications

10.               This measure does not engage any human rights.

 

Conclusion

11.               This Schedule is compatible with human rights because it does not engage any human rights.



 

DEFENCE LEGISLATION AMENDMENT

(MISCELLANEOUS MEASURES) BILL 2020

 

1  Short title

1.                   This clause provides for the short title of the Act to be the Defence Legislation Amendment (Miscellaneous Measures) Act 2020 .

2  Commencement

2.                   This clause provides for the amendments in the Schedules to commence as follows:

a.                    Amendments in Schedule 1 to the Defence Home Ownership Assistance Scheme Act 2008 (the DHOAS measure) will commence 28 days after the Bill receives Royal Assent. This will ensure that the Department of Veterans’ Affairs, who administers the scheme, will have sufficient time to update documents and procedures to reflect the changes.

b.       Amendments in Schedule 2, Part 1 to the Australian Defence Force Superannuation Act 2015 and the Superannuation Industry (Supervision) Act 1993 (ADF Super measure) will commence on the day after Royal Assent.

3  Schedules

3.                   This clause provides that that legislation that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.

 

SCHEDULE 1 - DEFENCE HOME OWNERSHIP ASSISTANCE SCHEME

Part 1 - Amendments

4.                   This Part makes amendments to the Defence Home Ownership Assistance Scheme Act 2008 (DHOAS Act) so that, when an eligible ADF member leaves the ADF, they can apply for a subsidy certificate for up to five years.

Item 1

5.                   This item amends subsections 17(2), 17(3) and 18(2), replacing all references to ‘2 years’ with ‘5 years’.

6.                   Subsections 17(2) and (3) of the DHOAS Act provide the time limit during which a member must apply for a subsidy certificate after leaving the ADF. Under subsection 17(2), an incapacitated member must apply within 2 years after they stopped being an ADF member because of their compensable condition. The time limit does not apply to incapacitated members if the Secretary is satisfied that the compensable condition caused or contributed to the failure to apply within 2 years. Under subsection 17(3), a separated member must apply for the subsidy certificate within 2 years of leaving the ADF. Item 1 will amend both of these subsections so that the time limit is 5 years, instead of 2 years.

7.                   Section 18 provides for surviving partner to make an application for a subsidy certificate in the event of the death of their ADF partner. Subsection 18(2) provides that a surviving partner must apply for a subsidy certificate within 2 years of either their partner’s death (if the partner was in the ADF at the time that they died) or within 2 years of their partner having left the ADF (if the partner was no longer in the ADF at the time that they died). Item 1 will amend subsection 18(2) so that the time limit is 5 years, instead of 2 years.

Items 2 to 4

8.                   These items amend the table at subsection 47(1) of the DHOAS Act.

9.                   Under sections 10 and 11 of the DHOAS Act, ADF members who leave the ADF and re-join within 5 years are described as rejoining members. The table at subsection 47(1) outlines what service can be counted for calculating the DHOAS subsidy. Existing items 3 and 4 of the table apply to rejoining members. The effect is that, if a rejoining member

re-joins in the Permanent Forces, their previous period of service will be included in the calculation. If a rejoining member re-joins in the Reserves, their previous period of service will only be included in the calculation if they have re-joined within 2 years.

10.               Items 2 to 4 will amend the table at subsection 47(1) so that the previous period of service can be included in the subsidy calculation for all rejoining members. The operation of sections 10 and 11 means that, as now, if a member re-joins more than 5 years after they left the ADF, their previous service will not be counted in the calculation.

11.               These amendments have been made to ensure consistency with the change of the period to apply for the subsidy from 2 to 5 years after leaving the ADF.

Part 2 - Application and transitional provisions

12.               This Part outlines how the amendments to the DHOAS Act will apply.

Item 5 - Definitions

13.               This item provides definitions that are relevant to the application and transitional provisions, defining ‘commencement’ as the day the item commences, ‘new law’ as the DHOAS Act as amended by the Schedule, and ‘old law’ as the DHOAS Act as in force immediately before the commencement.

Item 6 - Application provision - application for subsidy certificate

14.               This item provides that the new time limits in sections 17 and 18 apply in relation to applications for subsidy certificates made on or after commencement, or which are pending at commencement (that is had been made but not yet decided at commencement).

Item 7 - Transitional provision - application for subsidy certificate

15.               This item ensures that a former ADF member who had previously applied for a subsidy certificate and been refused because of the two-year time limit is able to apply again, notwithstanding the ordinary requirement in paragraph 17(1)(c) of the DHOAS Act that former ADF members can only apply for a subsidy certificate once. The new five-year time limit will apply to those applications (that is, the member must have left the ADF less than 5 years before making the new application to be eligible).

Item 8 - Application provision - accrued subsidy period

16.               This item provides that the new table in subsection 47(1) applies to the calculation of a person’s accrued subsidy period after commencement, even if the subsidy certificate was issued before commencement. Calculation and payment of subsidy before commencement will not be affected, but some rejoining members who are currently receiving the subsidy will receive a higher amount of subsidy after commencement, because their past period of service may now be counted in the calculation.

 

SCHEDULE 2 - AUSTRALIAN DEFENCE FORCE SUPERANNUATION

17.               This Schedule makes amendments to the Australian Defence Force Superannuation Act 2015 (ADF Super Act) and the Superannuation Industry (Supervision) Act 1993 (SIS Act). The amendments will clarify that ADF Super can be opened up so that ADF Super members who leave the ADF can continue to make contributions to the ADF Super fund.

Item 1

18.               This item amends the outline in section 3 of the ADF Super Act. The new outline will state that contributions can be made to ADF Super by persons other than the Department of Defence in relation to former long-term ADF members, in accordance with the Trust Deed. In particular, contributions can be made by employers of former long-term ADF members or self-employed former long-term ADF members.

Item 2

19.               This item inserts new definitions for ‘employer’ and ‘former long-term ADF member’ in section 4 of the ADF Super Act.

20.               ‘Employer’ has the same meaning as in the SIS Act.

21.               ‘Former long-term ADF member’ means a person who was, for at least 12 months, a Permanent member in the ADF, or a Reserve member in the ADF rendering continuous

full-time service. The person must have been an ADF Super member at the time they ceased being a Permanent member or continuous full-time Reservist, and must have continued to be an ADF Super member at all times since. The amendments in Schedule 2, together with amendments to the ADF Super Trust Deed, will open up ADF Super to contributions in relation to former long-term ADF members. The 12-month service requirement to be a former long-term ADF member is similar to the requirement that applies to Australian Government employees in the Public Sector Superannuation Accumulation Plan (PSSap).

Item 3

22.               This item inserts new subsection 16(3) in the ADF Super Act, which states section 16 does not prevent contributions from being made by employers of former long-term ADF members or by self-employed former long-term ADF members, in accordance with the Trust Deed. This clarifies that the Trust Deed can include provision for contributions to be made by, for example, civilian employers of ADF Super members who are no longer in the ADF.

 

Item 4

23.               This item amends section 24 of the ADF Super Act. That section provides that CSC (who administers ADF Super) can send documents to the Department and request the Department to give those documents to an ADF Super member. New subsection 24(1A) will provide that this section only applies to ADF Super members who are Permanent ADF members or Reserve members rendering continuous full-time service.

Item 5

24.               This item amends section 26 of the ADF Super Act, which outlines which people are subject to the ADF Super Trust Deed. New paragraph 26(ca) will provide that an employer of a former long-term ADF member who makes contributions to the ADF Super Fund for the benefit of the former long-term ADF member is subject to the Trust Deed.

Items 6 to 13

25.               These items amend the existing exemptions under the SIS Act that apply to ADF Super to reflect the changed insurance requirements of ADF Super members who have left the ADF.

26.               Section 68AA of the SIS Act provides that regulated superannuation funds are required to offer benefits for permanent incapacity and death to fund members, to be provided for by taking out insurance. Paragraph 68AA(9)(b) provides an exception for members of ADF Super. Paragraph 68AA(9)(c) provides an exception for ADF members who would be ADF Super members but have instead selected another superannuation fund. Sections 68AAA, 68AAB and 68AAC make provision for insurance arrangements for inactive accounts, low-balance accounts and accounts of members less than 25 years old, and again, ADF Super is excluded from the operation of these sections.

27.               The exception to the ordinary insurance requirements reflects the difficulty of obtaining these sorts of insurance products for serving ADF members. Instead, ADF Super members who are permanent ADF members or Reserve members rendering continuous full-time service are covered for death and permanent incapacity under the Australian Defence Force Cover Act 2015 .

28.               Items 6 to 13 amend the exceptions in section sections 68AA, 68AAA, 68AAB and 68AAC of the SIS Act. Instead of all ADF Super members being exempt, only ADF Super members who are Permanent ADF members or Reserve members rendering continuous full-time service will be exempt. This means ADF Super will be required to offer relevant insurance products to an ADF Super member who leaves the Permanent ADF or who ceases continuous full-time service.