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2008- 2009
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
DEFENCE LEGISLATION AMENDMENT BILL (No. 1) 2009
EXPLANATORY MEMORANDUM
(Circulated by the authority of the
Minister for Defence Science and Personnel
the Hon Warren Snowdon MP)
DEFENCE LEGISLATION AMENDMENT BILL (No. 1) 2009
GENERAL OUTLINE
The purpose of this Bill is to address two separate policy issues in
relation to:
a. the Defence Act 1903 to introduce a discretionary Tactical Payment
Scheme (TPS) to provide a new mechanism for making expeditious no-
liability payments to persons adversely affected by Australian Defence
Force (ADF) operations outside of Australia.
The scheme acknowledges that, in many areas in which the ADF operates
financial compensation for collateral damage to property, injury, or
loss of life is often a common expectation of local cultures.
Recognition and respect for such customs is vital in building
relationships with local communities, and enhances the safety and
security of our deployed ADF personnel.
The TPS is a Defence specific, discretionary mechanism that does not
preclude Defence from having recourse to the Act of Grace (AoG)
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 AoG payments
provisions and be managed and operated by Defence.
b. the Defence Home Ownership Assistance Scheme Act 2008 to:
. remove an unintended windfall gain in the eligibility and entitlement of
members who rejoined the ADF after a break in service prior to 1 July
2008;
. provide greater reliability of the subsidy certificate as evidence to a
home loan provider that subsidy is payable to a member by making the
issue of a subsidy certificate conditional on a member having a service
credit in the scheme;
. ensure that only serving members who are buying a home for the first
time have access to the subsidy lump sum payment option;
. require that for lump sum subsidy to become payable in respect of an
interest in land, the property must have been purchased subsequent to
the giving of the subsidy certificate that is the basis for the lump sum
requested;
. clarify that subsidy may be payable either as a monthly payment or as a
lump sum payment and monthly payment, and ensure that members who access
the subsidy lump sum payment option retain sufficient service credit in
the scheme to support on-going monthly subsidy payments;
. ensure that the entitlement of subsidised borrowers who enter into a
joint mortgage with a person who is not defined as a partner in the Act,
is proportional to the subsidised borrowers' liability;
. clarify the entitlements of subsidised borrowers who are partners and
who are both parties in respect of the same loan, in order to provide
for a consistent framework for shared liability; and
. enable delegation to the Scheme Administrator of 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.
Financial Impact statement
The amendments in the Bill will have no additional impact on Commonwealth
expenditure or revenue.
NOTES ON CLAUSES
Clause 1: Short title
1. This clause provides for the short title of the Act to be the Defence
Legislation Amendment Act ( No.1) 2009.
Clause 2: Commencement
2. This clause provides for the commencement provision for the Act. The
commencement dates for specific provisions are included in the
commencement information table.
Item 1 of the commencement table
3. This item provides that sections 1 to 3 (and anything in the Act not
elsewhere covered by the table) commence on the day on which the Act
receives the Royal Assent.
Item 2 of the commencement table
4. This item provides that Schedule 1 commences on the earlier of:
a) the 28th day after the day on which this Act receives the Royal
Assent; and
b) 1 July 2009
Item 3 of the commencement table
2. This item provides that Schedule 2 commences on the 28 day after the day
on which this Act receives the Royal Assent.
SCHEDULE 1 - TACTICAL PAYMENT SCHEME
Defence Act 1903
6. Schedule 1 amends the Defence Act 1903 to explicitly provide for a
discretionary Tactical Payment Scheme for activities led by the Defence
Force outside Australia.
Clause 1 - 123 H - Tactical payment scheme for activities of the Defence
Force outside Australia
7. This clause inserts a new section 123H at the end of Part X of the
Act to provide for the discretionary Tactical Payment Scheme (TPS) that
will provide a means for making no-liability payments to persons affected
by ADF activities outside Australia. An activity may include military
action, operation, exercise or training undertaken during an overseas
operation. This includes the full spectrum of operations that the ADF
conducts.
8. The new provision gives the Minister power to authorise payments to a
person who is not an Australian citizen, who may suffer loss, damage or
injury outside Australia because of an incident that occurs in the course
of activities of the ADF and the Minister considers it appropriate. Loss,
damage or injury may be of an economic or non-economic nature.
9. A TPS payment cannot be made more than 12 months after the relevant
incident. This is to ensure that payments are made close to the time of
the incident and with the purpose of respecting local custom and
maintaining support for ADF activities among the local community.
10. 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).
Clause 2 - 123 J Delegations in relation to the tactical payment scheme
11. This clause inserts section 123J which provides that the Minister
may, in writing, delegate his powers under section 123H to enable
expeditious payments to be made in theatres of operation. The Minister may
delegate to the following persons:
a) the Secretary;
b) the Chief of Defence Force;
c) a military officer in command of an activity of the Defence Force
outside Australia. The officer in command of a deployed force will vary
depending on the size of the operation and that officer may be at the
Lieutenant Colonel (or equivalent) or higher; and
d) an APS employee who holds, or performs the duties of, an APS 6 or higher
and is intended for those who have been deployed to an overseas operation
as the policy advisor to the officer in command of an activity outside
Australia. Such employees may be required to make expeditious payments
from time to time. The deployed policy advisor position is usually an ASP
6 or higher depending on the operation. Currently the deployed policy
advisor currently deployed to Afghanistan is an APS Executive Level 1.
12. Guidance for TPS payments for each operation will take into account
the cultural and socio-economic circumstances of the local people and will
be benchmarked against similar policies applied by coalition partners in
theatre. In special circumstances, where TPS claims exceed the financial
delegations or fall outside the guidance provided, such cases may be
referred to the Secretary, CDF or the Minister for approval.
Alternatively, an Act of Grace payment could be pursued.
13. The delegate must comply with any direction of the Minister in
exercising their power under a delegation.
SCHEDULE 2 - Defence Home Ownership Assistance Scheme Act 2008
14. Schedule 2 contains amendments to the Defence Home Ownership
Assistance Scheme Act 2008 to address a number of unintentional anomalies
since the scheme come into effect on 1 July 2008. The Defence Home
Ownership Assistance Scheme Act 2008 (the DHOAS) provides for the payment
of a subsidy on home loan interest, for members and former members of the
Defence Force. Subsidy may be payable where an eligible person has a
'service credit' in the scheme, based on the period of effective service in
the Defence Force, less a period of qualifying service and any period over
which subsidy has previously been received. If the member or former member
in receipt of a subsidy under the DHOAS dies, the subsidy may be passed to
their surviving partner.
Part 1 - Rejoining members
15. This Part amends the Act to clarify when a person is eligible as a
serving member or as a rejoining member and ensure that eligibility is
assessed in the same way for all rejoining members, regardless of the dates
on which they left and then rejoined the Defence Forces.
Clause 1 - Section 3 (Definition of effective service)
16. This clause amends the definition of effective service to expressly
exclude service performed prior to a break in membership of the Defence
Force of greater than five years. This definition operates whether the
break occurred before, on or after the commencement of the DHOAS. This
means that a person who again becomes a member of the Defence Force more
than five years after they were last a member cannot have their prior
service recognised as effective service for the purpose of establishing
eligibility to or calculating a service credit in respect of the DHOAS.
Service performed after again becoming a member of the Defence Force may be
recognised as effective service in accordance with the Defence Home
Ownership Assistance Scheme Regulations 2008 (the Regulations). This
measure operates in conjunction with the provisions in respect of the
eligibility and entitlement of rejoining members and rejoining
incapacitated members to support the retention focus of the scheme by
providing an incentive for persons to maintain continuity of service and to
rejoin the Defence Force after a break in service of no more than five
years.
17. The clause also provides that service in the Defence Force may in any
case be recognised as effective service in accordance with the Regulations.
This allows the Regulations to further define what service is recognised as
effective where that service has not been already excluded from being
recognised by the definition of effective service in the Act.
Clause 2 - At the end of section 8 (after the note)
18. This clause inserts a new subsection (3) at the end of section 8 of
the DHOAS. The new subsection makes clear that the general section dealing
with eligibility for serving members is not to apply to a member if that
member is eligible under sections 10 or 11, which deal with rejoining
incapacitated and rejoining members respectively. This statement makes
clear that a person is not able to choose the kind of eligibility that will
apply to them. Instead, when several types of eligibility appear to apply
to a member, the member is expressly eligible under the section that most
closely describes his or her circumstances. This means that the member
becomes eligible for the benefit and incentive to serve that recognises the
member's individual situation, because the member's eligibility and service
credit is able to be assessed using the method that most closely
corresponds to their circumstances.
Clause 3 - Paragraphs 10(1)(b) and 11(c)
19. This clause omits the time limit "on or after 1 July 2008" that
applied for the purpose of assessment of conditions for eligibility under
sections 10 and 11 of the DHOAS. The time limit was originally included in
order to emphasise the commencement date of the DHOAS but had the
unintended effect of causing those who would otherwise be classed as
rejoining incapacitated or rejoining members to seek eligibility as serving
members under section 8 of the DHOAS, due to their break in service
occurring before the commencement of the DHOAS. This amendment ensures that
all rejoining members are assessed on the same basis.
Clause 4 - Application-rejoining members amendments
20. This clause provides a transitional arrangement for application of
the amendments made by Part 1. It provides that the amendments made by this
part apply in respect of a decision in respect of giving a subsidy
certificates that is made on or after the commencement of the amendments,
or the payment of subsidy during an entitlement period that relates to a
subsidy certificate given on or after commencement. The measure has the
effect of saving any rights or entitlement that was communicated by the
decision to give or not to give a subsidy certificate before the
commencement of the amendments. This means that any person who was given a
certificate is able to rely on that assessment for the period that the
subsidy certificate is in force and for any related entitlement period
during which subsidy is payable. This ensures that the introduction of the
measures do not have an arbitrary or unduly harsh impact on a person who
has relied on an assessment of their accrued service credit provided under
the DHOAS as it operated prior to commencement of the amendments.
Part 2 - Subsidy certificate and service credits
21. This Part amends the act to ensure that a subsidy certificate is more
reliable as evidence to a home loan provider that subsidy is payable to a
member, by making the issue and operation of a subsidy certificate
conditional on a member having a service credit.
Clause 5 - Subsection 16(2)
22. This clause provides that the Secretary must give a subsidy
certificate to an applicant if sections 17,18,19 or 20 applies in the case
of an applicant, and the applicant has a service credit in their own right,
or would have a service credit as a surviving partner of an eligible person
if the subsidy certificate were issued. The effect of this clause is to
prevent the giving of a subsidy certificate to a person if subsidy cannot
be payable to the person because he or she does not have a service credit.
Clause 6 - After subparagraph 22(b)(i)
23. This clause has the effect of making a subsidy certificate held by a
person who is not a member of the Defence Force cease to be in force if the
person no longer has a service credit. This ensures that the person cannot
use the subsidy certificate to establish a subsidised loan, because subsidy
cannot become payable where the person does not have a service credit. The
effect is limited to persons who are not at the time members of the Defence
Force, because such a person does not have a reasonable expectation of
accruing a further service credit. The clause does not affect a subsidy
certificate held by a member of the Defence Force, because such a person
may have a reasonable expectation of accruing a further service credit
through further service, even if he or she has no service credit at a
particular time.
Clause 7 - Application-subsidy certificates and serving credits amendments
24. This clause provides a transitional arrangement for application of
the amendments made by Part 2. This clause provides that the amendments
made in this Part apply only in relation to a decision in respect of giving
a subsidy certificate that is made on or after the commencement of the
amendments and to subsidy certificates given on or after commencement. This
has the effect of preventing retrospective application to decisions to give
or not to give subsidy certificates made before commencement of the
amendments, and provides a clear point of transition for the scheme
administrator to begin applying the new criterion for giving a certificate.
This also means that any subsidy certificate issued prior to commencement
of the amendments remains in force, subject to the operation of the Act at
the time that it was issued.
Part 3 - Subsidy lump sums
25. This Part provides that the subsidy lump sum option may only be taken
in conjunction with monthly subsidy, and is only payable on the first
residential property purchased while a member of the Defence Force. This
Part clarifies the criteria for access to the lump sum option, consistent
with the intent of this benefit to assist members of the Defence Force who
are first home buyers.
Clause 8 - Section 26
26. This section is repealed and substituted with a new provision in
relation to the form of subsidy being either a monthly subsidy or a both a
monthly subsidy and a lump sum subsidy. A subsidy lump sum is only payable
to a member of the Defence Force, and is only payable in relation to the
first residential property bought while a member of the Defence Force.
Clause 9 - Paragraph 34(1)(f)
27. This clause adds two criteria for approval of a lump sum payment. The
first new criterion is that the Secretary must be satisfied that there is a
reasonable expectation that subsidy will be payable to the subsidised
borrower for a specified period depending upon whether the borrower is a
member of the Permanent Forces or the Reserves. The effect of this measure
is to ensure that an applicant for the lump sum must have sufficient
service credit that, in addition to payment of the lump sum, he or she is
able to be paid monthly subsidy until a further service credit may be
accrued to allow monthly subsidy to continue.
28. The second criterion added is that subsection (2) of section 34,
relating to previous ownership of residential property, must not apply in
relation to the person applying for the lump sum.
Clause 10 - Subsection 34(2)
29. This clause prevents a person from being paid a lump sum subsidy if,
while a member of the Defence Force, he or she individually or with a
partner has previously purchased a residential property, whether or not the
person occupied the property. This clause does not apply if the property
purchased is the one in relation to which the lump sum subsidy is sought,
and the purchase occurred after the person was issued with the subsidy
certificate that provides the basis for the request for payment of a lump
sum. This has the effect of preventing payment of the lump sum to persons
who have previously purchased a residential property for investment
purposes, as well as those who have previously bought a home that they have
occupied.
Clause 11 - Application-subsidy lump sum amendments
30. This clause provides that the amendments apply to a request for the
payment of a lump sum made on or after the day that the amendments
commence. This makes the application of the amendments prospective, and
prevents the amendments from applying retrospectively in relation to
request for a lump sum subsidy made before the commencement of the
amendments.
Part 4: Shared liability
31. This Part sets out a range of amendments that set out the way that
subsidy entitlements are assessed and paid when there is more than one
person with an interest in the land in relation to which subsidy becomes
payable. The amendments provide additional detail about how shared
ownership and liability for a loan can affect a person's entitlement under
the DHOAS.
Clause 12 - Section 3
32. This clause inserts a definition of loan limit, providing that the
term has the meaning given in section 51, as affected by sections 51A, 51B
and 51C, which have been added by the amendments in this Part.
Clause 13 - Paragraph 28(4)(c)
33. This clause substitutes a new paragraph 28(4)(c) to the DHOAS. The
new paragraph omits the mention of partners, and so contemplates that
subsidy entitlements relating to two subsidised borrowers may extend to any
situation where there are two borrowers, regardless of the nature of the
relationship between the borrowers. The amendment also inserts a note to
act as a signpost at the end of the paragraph, to alert readers to the
special rules about subsidy entitlements that may apply for multiple
subsidised borrowers.
Clause 14 - Subsection 51(1)
34. This clause adds words to the subsection to make clear that the
subsidy is that which is payable to a subsidised borrower.
Clause 15 - Paragraph 51(1)(a)
35. This clause adds words to the paragraph to make clear that the
capital amount referred to is that which is owed by a subsidised borrower.
Clause 16 - Paragraph 51(1)(b)
36. This clause repeals the paragraph and substitutes a new paragraph to
make clear that the loan limit referred to is that which applies to the
subsidised borrower, as applicable form time to time during the entitlement
period. This links the entitlement to subsidy clearly to the individual
subsidised borrower rather than to the loan, and recognises that the
subsidised borrower's loan limit may vary over time as a result of the
changes in the borrower's length of service or eligibility.
Clause 17 - At the end of subsection 51(1)
37. This clause inserts a note at the end of subsection 51(1) to alert
the reader that specials rules under sections 51A, 51B and 51C may affect
the loan capital if a subsidised borrower and another person are liable in
respect to the same loan. Sections 51A and 51B cover persons who are liable
for the same loan and who are partners. Section 51C covers persons who are
jointly and severally liable for the same loan and who are not partners.
Clause 18 - Subsection 51(2)
38. This clause omits words in subsection 51(2) and substitutes new
words, to make clear that the loan limit referred to is that which applies
in respect of an individual subsidised borrower.
Clause 19 - Subsections 51(4) and (5)
39. This clause repeals subsections 51(4) and (5). The matters covered by
these subsections are now covered by sections 51A and 51B, which are
inserted under clause 20.
Clause 20 - After section 51
40. This clause inserts the new sections 51A, 51B and 51C after section
51. These sections clarify the treatment of loans for which both a
subsidised borrower and another person are liable, whether or not the other
person is the subsidised borrower's partner and whether or not the other
person is also a subsidised borrower.
41. Section 51 describes the effects where a subsidised borrower and his
or her partner are both parties to the same loan. This section applies
whether the partners are jointly and severally liable, or individually
liable. The table at subsection 51(2) specifies the treatment of the
capital amount owing on the loan and the subsidised borrower's loan limit.
42. Item 1 of the table provides that where both partners are subsidised
borrowers, then each is taken to owe 50 percent of the total capital amount
owing and each is taken to have a loan limit that is the average of their
individual loan limits that would apply if each were a sole borrower. This
will allow the partners together to maximise the amount of subsidy payable
in respect of loan for which they are both liable, and simplifies the
administration of benefits for partners who are both subsidised borrowers
by providing clarity the individual entitlement of each person.
43. Item 2 of the table provides that where both partners are parties to
a loan, but only one is a subsidised borrower with respect to that loan,
the subsidised borrower is taken to be liable for the whole amount of the
loan and that his or her loan limit applies with respect to determining the
capital amount on which subsidy is payable.
44. Section 51B provides that where item 1 of the table at subsection
51A(2) applies to partners who are subsidised borrowers in respect of the
same loan, this item continues to apply where one of the subsidised
borrowers dies and his or her subsidy entitlement passes to the surviving
borrower through the operation of sections 60 or 61. The section provides
for the surviving borrower's entitlement in his or her own right to be
calculated under item 1 of the table at subsection 51A(2), as if the
deceased borrower were still alive. The note to the section identifies that
the entitlement transferred from the deceased borrower applies to the
surviving partner in accordance with sections 64 and 65. These sections
allow that the surviving borrower, in his or her entitlement as a surviving
partner, is to be treated in the same way as the deceased partner, as if
the deceased partner had not died, and notwithstanding entitlement to
subsidy in his or her own right. This allows the benefit transferred from
the deceased partner to continue to be calculated under item 1 of the table
at subsection 51A(2). The surviving partner may thus be paid subsidy both
in his or her own right and as a surviving partner, as if the deceased
partner had not died.
45. Section 51C provides for the calculation of entitlement where a
subsidised borrower is jointly and severally liable for a subsidised loan
with another person who is not his or her partner. In such a case, the
subsidised borrower is taken to be liable for 50 percent of the capital
amount owning on the first authorisation day for subsidy, and to have the
loan limit that applies to him or her under subsection 51(2). This section
operates whether the other party to the loan is a subsidised borrower or
not, and prevents the indirect use of subsidy from the subsidised borrower
for the benefit of a person who is not entitled or who has a separate
entitlement in his or her own right.
46. Note 1 to section 51C advises that if liability is shared between
partners, this circumstance is covered by sections 51A and 51B.
47. Note 2 to section 51C advises that if the subsidised borrower and
another person are liable individually in respect of a subsidised loan,
then the subsidised borrower's entitlement is calculated in accordance with
section 51, on the basis of the amount that the subsidised borrower
actually owes.
Clause 21 - Application-shared liability amendments
48. This clause provides a transitional arrangement for application of
the amendments made by Part 4. The clause provides that the amendments
apply only in relation to payments made in respect of an entitlement period
that starts after commencement. This ensures that subsidised borrowers who
are partners do not have to change an apportionment of subsidy made under
administrative arrangements that applied prior to the commencement of the
amendments. This also ensures that a member who was assessed as eligible as
a sole subsidised borrower under section 51 without regard to the shared
nature of their interest and liability is not required to repay an amount
of subsidy paid to them in the period before the amendments commence.
Part 5 - Delegations
49. This section provides for delegations to senior employees of the
authorised Commonwealth contractor.
Clause 22 - Paragraph 81(2)(a)
50. This clause omits the reference to section 73 from paragraph
81(2)(a), which limits the ability of the Secretary to delegate powers
relating to review of decisions to an employee of the authorised
Commonwealth contractor (the scheme administrator). Section 73 requires the
Secretary to give to affected persons notice in writing of the making of a
reviewable decision and the person's right to have the decision reviewed.
The notice must include reasons for the decision. It is appropriate that
this notice is given by the Secretary's delegate who has made the
reviewable decision and is best placed to provide the reasons for the
decision. As most reviewable decisions are made by the Secretary's delegate
employed by the authorised Commonwealth contractor, this power should also
be delegable to those persons.
Clause 23 - Transitional - delegations amendments
51. This clause provides a transitional arrangement for application of
the amendments made by Part 5. The clause provides that the amendments
apply only in relation to delegations given on or after commencement. The
clause also saves all delegations given before commencement, so that these
delegations remain in force and do not have to be given again as a result
of the amendments.
.