Lump sum

Some members will have a once-only chance to convert up to four years of their accrued DHOAS entitlement into a lump sum.

To access the lump sum, you need to have completed the qualifying period (four consecutive years for Permanent members, eight consecutive years of effective service for Reservists) as well as have accrued entitlement to DHOAS that can be converted into a lump sum. 

After you convert entitlement to a lump sum, you must also retain sufficient service credit to support on-going monthly DHOAS subsidy payments.

For example, a serving Permanent member accrues one month of entitlement to DHOAS for every month of service completed. You have completed eight years of service. This means you have completed the four year qualifying period and you have also accrued four years of entitlement to DHOAS.

You can convert up to four years of your entitlement minus at least one month. You must retain this month at least, and continue to serve in the ADF and accrue entitlement, if you are going to support ongoing DHOAS subsidy payments.  

Reservists must also retain sufficient service credit to receive the monthly subsidy. Reserve members accrue one year of entitlement to DHOAS for every financial year of effective service completed. This means out of your accrued entitlement you will need to retain at least one year of DHOAS entitlement to receive ongoing subsidy payments after you have taken out your lump sum.  

For example, you're a Reservist who has completed 11 years of continuous, effective service. This means you have completed your eight year qualifying period and you have also accrued three years of entitlement. You can convert up to a maximum of two years of your three year entitlement into a lump sum.  This leaves you with one year of accrued entitlement to support your ongoing monthly subsidy payments.

Tier 1 subsidy applies

 

For the purpose of calculating the lump sum, the Tier 1 subsidy amount is used (even if you're entitled under a higher subsidy tier). This reflects the purpose of the incentive to purchase a first home while your in service. 

 

The maximum Tier 1 subsidy is $298 per month (as at July, 2011), based on the 2010-11 Subsidised Loan Limits and current median interest rate. Therefore, if you were converting four years of your accrued entitlement you would receive $14,304 as a lump sum (which is 48 months x $298.00). 

 

PLEASE NOTE: If interest rates fluctuate, so too will the Tier 1 subsidy amount, which will impact on your lump sum amount. 

 

Conditions of accessing lump sum

The conditions for accessing the lump sum are that:

  • You must retain sufficient service credit to support on-going monthly DHOAS subsidy payments
  • There is a reasonable expectation that you will continue to serve for at least another 12 months
  • You have not owned a home, either to live in or as an investment, whilst serving in the ADF. (You can own an interest in non-residential property).   
  • The lump sum will not be paid on a residential property bought before a person is given the Subsidy Certificate that is the basis for the lump sum request. This prevents a person getting the lump sum where they have only owned the one property, but bought it some time previously.
  • You (and/or your family) need to live in the home for at least 12 months from the time you access the lump sum. 
  • You have not previously accessed DHOAS subsidy assistance
  • A maximum of 48 months service credits may be exchanged for a lump sum at the Tier 1 level

 

Ongoing monthly subsidy payments and the lump sum  

 

After payment of your lump sum, the remainder of your accrued entitlement is paid to you in monthly subsidies, into your DHOAS home loan. These monthly subsidy payments are calculated using your eligible Tier level (which maybe higher than Tier 1).  

 

The years of entitlement that you convert into a lump sum are counted towards your maximum accrued entitlement period for DHOAS of up to 20 or 25 years (depending on warlike service).  

 

For example, if your maximum accrued entitlement to DHOAS is 20 years (after you've subtracted you qualifying period), you can convert four years into a lump sum and then receive a monthly subsidy for 16 years (into an eligible DHOAS home loan). Your monthly subsidy is paid at your eligible Tier level.

 

Timing of lump sum payment

 

The lump sum is not paid before or on settlement of your property, and cannot be used as an upfront deposit to purchase your house.

 

The lump sum, along with your first subsidy payment, is paid into your DHOAS home loan after it has been drawn down. 

 

You will receive your lump sum and your first subsidy after your Home Loan Provider advises DVA that you have drawn down your loan and we process your payment.

 

The payment will be made at the start of the month, and will cover the month prior.

 

For example, if you draw down your loan in August, you will receive your lump sum and your first subsidy payment in early October. This will be for the month of September.   

 

Lump sum payment example

You have completed nine years in the Permanent Forces. This means you have completed your four year qualifying period, and you have also accrued five years of entitlement to DHOAS.  

You decide to purchase a home and access the DHOAS. You elect to convert four years of your five year  entitlement period into a lump sum. 

This means you will have one year of accrued entitlement left after your lump sum is paid.

After you receive your lump sum, you will also receive your ongoing, monthly DHOAS subsidy payments at the Tier 2 level (as you have completed eight or more years of service, but less than 12 years).

You can continue to receive the subsidy payments (paid into an eligible DHOAS home loan) for as long as you have a Service Credit, that is, accrued entitlement. 

As of today, your accrued entitlement is one year. As long as you continue to serve in the ADF you will keep accruing further entitlement (in addition to the one year you've accrued so far), which you can use to access your ongoing monthly subsidy payments.

Any accrued entitlement you have not accessed while you are in the ADF, you can access after you separate. At present, this would be one year. This entitlement period may increase further if you complete warlike service.   

The maximum period of time you can access DHOAS is up to 20 or 25 years depending on warlike service. This includes the four years of entitlement you used to access the lump sum.

Your lump sum payment is calculated as follows:

Tier 1 Subsidy of $298 per month multiplied by 48 months equals $14,304 (as at July 2011).

(PLEASE NOTE: The total amount of your lump sum will depend on the Tier 1 subsidy value applicable at the date you access your lump sum. If interest rates reduce, so too will the Tier 1 subsidy amount, which will reduce your lump sum amount. See Your Subsidy Assistance for current 2010-11 loan limits.

On receipt of notification from the home loan provider that your home loan has been approved and you have drawn down on the loan, DVA will authorise payment of the lump sum amount into your DHOAS home loan.

We will also commence making your monthly DHOAS subsidy payments into your mortgage as well. You will receive Tier 2 subsidy payments, given you have completed a minimum of eight years of service and are eligible under Tier 2.

Construction Loans and the lump sum

 

During the construction of your home, you may submit multiple applications for Subsidy Certificates to ensure your DHOAS payments are re-calculated on your higher home loan balance as you draw down at each stage of construction.

 

Please note that your subsidy payments are calculated on the home loan balance as at the time you receive the subsidy that is based on your latest Subsidy Certificate.

 

If you deposit the lump sum into your home loan account this will reduce the amount of your loan balance. If this reduces the amount that is covered by your subsidised loan limit, your subsidy payment will be reduced.

 

You may opt to delay receiving your lump sum until after you have completed construction, to ensure your ongoing subsidy payments are based on your maximum home loan balance, not a balance reduced by the lump sum.

 

PLEASE NOTE: You should be aware that if you delay the payment of your lump sum until you finish construction there is the potential for interest rates to reduce in that time. This could mean you will be paid a smaller lump sum (based on the maximum Tier 1 subsidy valid at the time).