Overview of scheme
The Defence Home Ownership Assistance Scheme (DHOAS) provides eligible ADF members with access to a subsidy on the interest incurred on their home loan.
The aim of the scheme is to improve ADF retention rates, by making home ownership easier for members in today's competitive housing market.
Members are given an incentive to remain in the ADF through access to progressively higher levels of subsidy assistance the longer they serve.
Who can assist ADF members?
The Department of Veterans' Affairs (DVA) has been engaged by the Department of Defence as the DHOAS Scheme Administrator.
Defence has also appointed a panel of three DHOAS Home Loan Providers to provide a range of DHOAS-approved mortgages.
They are Australian Defence Credit Union (ADCU), Defence Bank Limited (Defence Bank) and National Australia Bank (NAB). DHOAS home loans are not available from other providers.
DVA's role as Scheme Administrator is to:
- assist ADF members with their inquiries
- determine DHOAS eligibility and entitlement
- provide Subsidy Certificates to members, and
- pay the monthly subsidy into members' home loan accounts
Role of the three Home Loan Providers is to:
- offer you a choice of DHOAS-approved loan products
- assist you with your home loan inquiries
Applying for a subsidy certificate
The Subsidy Certificate confirms your eligibility and entitlement to DHOAS.
If you meet the DHOAS requirements, DVA will post to you your Subsidy Certificate, as well as important information about your DHOAS subsidy.
We will also include details about the subsidy tier under which you're eligible for DHOAS.
You will need to present your subsidy certificate to one of the three appointed DHOAS home loan providers, either Australian Defence Credit Union, Defence Bank or NAB, when applying for a home loan.
Please note the subsidy certificate will not be faxed directly to your home loan provider.
When you draw down on your loan, your home loan provider will advise DVA of your loan details and we will start your monthly subsidy payments.
Please note that special conditions apply to construction loans that involve multiple drawdown events while the house is being built.
Subsidy certificate conditions
A DHOAS subsidy certificate is valid for 12 months from the date it is issued. The date of issue and the date of expiry is indicated on the certificate.
If your subsidy certificate expires and you require a replacement, you must complete a new application. Your new application will be assessed in accordance with the legislation and regulations applicable on the date your new application is received.
A subsidy certificate can be used only once to start subsidy payments on a DHOAS home loan.
Once your payments commence, the subsidy certificate you used to start them will no longer be valid.
At any given time, you can hold only one valid subsidy certificate, and you can receive payment on only one DHOAS-subsidised property.
If you change your home loan, or you sell your current subsidised home and you want to transfer your
subsidy to another property, you will have to apply for a new subsidy certificate to restart your payments.
While you are serving in the ADF, there is no limit to the number of subsidy certificates you can apply for, one at a time, so long as you have retained your eligibility and entitlement to DHOAS at the time of application.
After you separate, you can only apply for one more subsidy certificate. You must apply for that subsidy certificate within two years of separating.
If you are separating, you need to consider carefully your use of this one subsidy certificate, especially if you have a construction loan being drawn-down in installments.
DHOAS home loan
The amount you borrow on your home loan is between you and your home loan provider, based on your provider's lending criteria.
Your eligible DHOAS subsidy tier will determine the portion of your home loan that will attract a subsidy.
Please note that eligibility for a DHOAS subsidy certificate does not mean approval for a DHOAS home loan, or for a loan of a certain amount.
If you are refinancing an existing mortgage you will be required to pay any transfer fees.
Please note that special conditions apply to DHOAS Construction Loans.
Receiving your subsidy payment
You will start receiving your monthly subsidy payment after your home loan provider advises DVA that you have drawn down your loan and you have submitted to DVA a completed a Subsidy Authorisation Request Form (132KB), indicating you are meeting the conditions of the scheme. Based on the amount you have borrowed up to your subsidised loan limit, we will then calculate your subsidy payment.
Payments are made at the start of each month, and cover the month or two months prior.
For example, if you draw down your loan in August, you will receive your first subsidy payment in early October. This first payment will be for September, and depending on the actual date within the month that you draw down, it may also be for August.
If you draw down your loan prior to the tenth-last business day of the month, your first payment will cover two months of subsidy.
You will not receive your first subsidy payment (and your DHOAS lump sum if you have selected that option) at the same time you settle your house, or at the same time your first housing loan repayment is due.
Your mortgage obligations
DHOAS subsidy payment amounts are subject to fluctuations from changes in subsidy tier level, interest rates and service status. Additionally, ongoing payment of subsidy is limited by the length of your entitlement which is determined by the service credit you hold.
As the consistency of DHOAS payments is not guaranteed, the DHOAS subsidy only supplements your mortgage payments, helping to ease the pressures of home ownership. It remains your responsibility to ensure that you can meet your mortgage repayment obligations, as agreed with your Home Loan Provider, regardless of your DHOAS subsidy.
Payments on eligible partner and multi-party loans
Special arrangements are made for the payment of monthly subsidies on joint loans taken out by partners who are both DHOAS-eligible, and on loans that eligible members take out with other non-eligible parties. For further information, please see Payments on Eligible Partner and Mutli-Party Loans.
Amount of monthly subsidy
The amount of your monthly subsidy will depend on three key factors:
1. your length of service, which determines your eligible subsidy tier
2. the amount of your home loan balance up to the subsidised loan limit in your eligible tier (at the time your first subsidy payment is calculated), and
3. if you are separated from the ADF, how long you served before you separated
You are eligible under one of three subsidy tiers. As you reach certain service milestones you move into a higher subsidy tier.
For Permanent members the minimum qualification for the three subsidy tiers are 4, 8 and 12 years of service. For Reservists it is 8, 12 and 16 years of service.
The higher your eligible tier, the greater your benefits under DHOAS.
New monthly subsidy payments are calculated on the subsidised loan limits that are valid when your first subsidy payment period commences.
If your first subsidy payment period commences from or after July 2012, refer to the Subsidy Tier table below which shows subsidy values that are valid for 2012-13.
The 2012-13 subsidised loan limits do not apply to subsidies that are first paid in July 2012 but cover the payment periods of May or June 2011.
If your first DHOAS subsidy payment period commenced prior to 1 July 2011, your subsidy payments are calculated on 2011-12 Subsidy Tiers
Please note: Your monthly subsidy payment will be calculated on the balance of your DHOAS home loan at the time of your first subsidy payment, not at the time you drew down your loan (even if you drew it down only a day or week or month earlier). You need to be mindful of this if you draw-down your loan and then change your balance in any way before you receive your first subsidy payment. If you have drawn down a loan amount (eg $400,000) and then reduced this balance (eg down to $200,000) before your first subsidy payment commences, you will receive a subsidy payment that is calculated on the reduced loan balance.
DHOAS Subsidy Tiers 2012-13
Subsidy Tier Level
Subsidised Loan Limit
Up to $219
Up to $329
Up to $439
- This table shows the 2012-13 Subsidy Tiers. Your new subsidy will be calculated on these subsidised loan limits if your first payment period starts from or after July 2012. If your first payment period started before 1 July 2011, please see the Subsidy Tier Tables, under Subsidy Tiers and Payments. Monthly subsidy values shown here are based on the median interest rate valid as at May 2013. These monthly subsidy values may change based on fluctuations in interest rates.
Explanation of subsidy tiers
Your eligible tier determines your subsidised loan limit, which is the portion of your home loan that will attract a DHOAS subsidy.
Your monthly subsidy payment is based on the amount you borrow up to your subsidised loan limit.
If your home loan is equal to or greater than your eligible tier's maximum loan limit you will then receive the maximum monthly subsidy.
If it is less, your subsidy will be less. For further details, please see Your Subsidy Payments.
With the exception of construction loans, the home loan balance you have at the time you first receive the DHOAS subsidy, and the portion of that loan balance which includes your subsidised loan limit, is used to determine your monthly subsidy amount.
This will remain the case for the duration of your DHOAS assistance on that home loan, unless you stop then restart the subsidy payments. In this case, the amount of your home loan balance up to your subsidised loan limit, current at the time you restart DHOAS, will apply.
Please note: Your monthly subsidy payment will be calculated on the balance of your DHOAS home loan at the time of your first subsidy payment, not at the time you drew down your loan (even if it is only a day or week earlier). You need to be mindful of this if you draw down your loan and then change your balance in any way before you receive your first subsidy payment.
In other circumstances, you may have to delay receiving your first subsidy payment until awhile after taking out your home loan. This may occur for a number of reasons, including the inability to occupy the home immediately, which is a condition of receiving the subsidy.
In this case, the balance of your home loan and the subsidisable portion of it, may be less than when you originally took out the loan, especially if you deposit lump sums into your loan or make additional payments. This would result in you receiving a lesser subsidy payment.
Median interest rate changes
On the tenth-last business day of each month, DVA reviews the median interest rate used to calculate the DHOAS subsidies for that month.
If the rate changes, your subsidy payment will also change.
The amended subsidy payment for that month is deposited in to your DHOAS home loan at the beginning of the following month.
For example, we review the median interest rate on the tenth-last business day of November. We then use the revised median interest rate to calculate your subsidy payment for the month of December. The subsidy for November is then deposited into your home loan account early in December.
You can calculate the median rate yourself by reviewing the list of standard variable home loan interest rates listed at www.cannex.com.au and identifying the median interest rate.
This can be done with the Excel formula 'Median', or by listing the rates from the lowest to the highest and selecting the interest rate positioned in the middle.
Subsidised Loan Limits
The subsidised loan limit in your tier level is the maximum portion of your home loan that will attract a subsidy. Your monthly subsidy payment is based on the amount you borrow up to your subsidised loan limit.
The subsidised loan limits in each tier are based on a percentage of the the Average House Price (AHP).
The limits are reviewed annually, as required under the DHOAS Act, to ensure they remain in line with the AHP and contemporary housing costs.
Annual changes to the subsidised loan limits will not affect you if you've already established your DHOAS home loan and are in receipt of monthly subsidy payments.
The reason for this is that while the value of the house that you are buying may increase, the principal value of your loan will not.
The subsidised loan limits and the balance of your home loan, which are current in the month that your first subsidy payment covers, will remain applicable throughout the life of that home loan for the purpose of working out your DHOAS subsidy payments.
This applies unless you stop then restart your DHOAS assistance related to that home loan. In this case, the subsidised loan limits and home loan balance that are current at the time you restart your DHOAS subsidy payments will apply to determine your subsidy, not your original draw down loan amount or previous years' loan limits. This may result in receiving a smaller subsidy payment than you did prior to the halt in DHOAS.
Separation and your eligible tier
If you separate from the ADF, your eligible subsidy tier will depend on the length of your service prior to separating.
If you completed 20 or more years of ADF service before separating, you can receive your DHOAS assistance at the tier 3 level.
If you did not complete 20 or more years of service, you will receive your DHOAS payments at the tier 1 level. This is regardless of what tier level you were eligible for before you separated.
At the time of your application, you need to have served in the ADF within the last two years to be eligible for DHOAS.
To start accessing the Scheme, you first need to complete a minimum qualifying period (or in certain circumstances, foreign service) and then gain a minimum Service Credit.
For Permanent members, the qualifying period is four consecutive years of service and a minimum service credit is at least one month of service (although it is better to have at least two months of credit to cover any administrative processes).
For Reservists, the qualifying period is eight years of effective Reserve service (at least 20 days of paid Reserve service within a financial year) and a minimum service credit is at least one year of effective service.
DHOAS is payable to former members of the ADF who have been in service within the last two years, as long as you completed your qualifying period and gained a service credit for DHOAS at the time you separated from the ADF.
Length of entitlement
You can receive a DHOAS subsidy payment for as long as you have a service credit, which is DHOAS entitlement accrued by completing effective ADF service. Once your service credit is exhausted you can no longer receive the DHOAS subsidy, however much longer your DHOAS home loan repayments will continue.
You accrue entitlement and build your service credit while you continue to serve in the ADF.
Permanent members accrue one month of entitlement for every month of service (or one year of entitlement for every 12 months of service) that they complete after their qualifying period).
Reservists accrue one year of entitlement for every financial year of effective Reserve service they complete. Please note you are not granted your year of DHOAS entitlement until you have actually completed the 20 days of paid Reserve service within the financial year. Subsidy cannot be paid in advance of a Reservist completing the effective service, on the assumption that this will occur.
If your DHOAS service credit runs out before you can complete further effective service, your subsidy payments will cease. They can resume once you undertake the effective service, as long as all other DHOAS conditions can be met.
Overall, your service credit equals the total number of years you have served in the ADF, minus your qualifying period (four years for Permanent members and eight years for Reservists).
You also subtract the number of years you have accessed other Defence home loan subsidy schemes, the Defence HomeOwner Scheme and Defence Service Homes.
For example, if you are a Permanent member who has served for 20 years, you subtract your four year qualifying period. This gives you a DHOAS service credit of 16 years. Given you have already accessed the DHOS for six years, you also subtract this amount. This means you have a service credit of 10 years.
The maximum entitlement to the DHOAS, DHOS and DSH combined is 20 years without warlike service and up to 25 years with warlike service.
In the example above, the member has already accessed the DHOS for six years. This means he can only accrue entitlement to DHOAS up to a maximum of 14 years without warlike service or up to 19 years with warlike service.
Breaks in service can also impact on the length of your entitlement. Refer to Rejoining the ADF after a Break, or contact the DHOAS service centre for further information.
Major conditions of DHOAS
A DHOAS home loan can only be used for the purpose of buying a home, land to build on or for construction, renovating or doing other home improvements.
You are required to live in the home for at least 12 months from the time you start receiving DHOAS. Your subsidy payments cannot start until you occupy the home (except for construction loans).
If you have received your posting order and you know you will not be able to meet the 12 month occupancy requirement, you cannot receive the DHOAS subsidy.
However, if you start receiving your DHOAS subsidy in good faith you will be able to live in your home for 12 months, and then subsequently you receive a posting order, your subsidy will continue to be paid.
If you are receiving a DHOAS subsidy and you learn that you are to be posted, it is very important to advise DVA by the Change in Circumstances form before you make the shift. If advised in advance, DVA can arrange an exemption to the occupancy requirement before you shift to ensure there is no disruption to your subsidy payments.
If you wait until after you have moved, your subsidy may be ceased or suspended, and you may have to repay any overpayments, until an exemption can be organised.
Special conditions apply to DHOAS Construction Loans, including the requirement to occupy the home for 12 months from the time construction is complete and the house is occupiable.
PLEASE NOTE: If you have received a waiver on the 12 month occupancy requirement (for any reason) and are receiving the DHOAS subsidy, if you close your DHOAS home loan and restart another, the occupancy waiver will not carry over to the new loan.
You will need to occupy the home over which you have taken the new DHOAS loan for 12 months, from the time you start receiving the subsidy.
Before you close or make changes to your DHOAS home loan you are encouraged to contact DHOAS for further information, to ensure you understand the impact of these changes.
After completion of 12 months' occupancy
After you have occupied your subsidised home for 12 months, you can continue receiving your subsidy payments into your DHOAS home loan, regardless of whether or not you reside in the house.
You can receive your subsidy as long as your existing home loan remains current and is not paid out.
If you refinance the property for any reason you will need to apply for another subsidy certificate, which would reinstate the 12 month occupancy requirement.
You can rent out the property and still receive your subsidy, as long as your DHOAS home loan remains current.
If you rent out your subsidised house, it is recommended that you seek independent tax advice about the implications of receiving the DHOAS subsidy on an investment property.
Change in Circumstances
You are required to advise DVA of changes to your ADF service, subsidised property and/or status of your DHOAS home loan that may impact on your DHOAS eligibility. Please see Change in Circumstances for further details.
Your eligibility and entitlement to DHOAS can change significantly if your circumstances change. For example, if you separate from the ADF; you do not complete effective service as a Reservist; or your one-off post-separation subsidy certificate expires after 12 months.
If you sought information about DHOAS some time ago and were advised at that time you were eligible for DHOAS or had a certain level of entitlement, please do not assume this advice remains valid if your circumstances have changed.
You are urged to speak again with a DHOAS assistant or to re-check this website to ensure your understanding of your eligibility and entitlement remains correct.