Conditions of receiving subsidy
- DHOAS home loan conditions
- Occupancy requirements
- Construction loans and conditions
- Subsidised property
- Lump sum conditions
Use of DHOAS home loan
DHOAS home loans must be secured by the subsidised property and can only be used for buying a home, buying land, building a home, renovating or extending your home, or refinancing a loan for one of these purposes.
You cannot use funds gained from a DHOAS home loan to buy investment properties, cars, boats, holidays or for other purposes. For this reason, no lines-of-credit are available on DHOAS mortgage products.
DHOAS subsidy is not payable if any part of the interest in the land purchased using a DHOAS loan is held as a trustee or as a beneficiary of a trust.
Refinancing with a DHOAS home loan
If you are an existing home owner and you have an outstanding mortgage, you can refinance with a DHOAS home loan provider to access DHOAS, if eligible.
However, you can only receive a DHOAS home loan on the outstanding amount of your original loan, unless you need to borrow additional funds for the purposes allowed under the legislation.
For example, if you are refinancing with DHOAS, you cannot take out a larger home loan than your original mortgage only for the purposes of maximising your subsidy payments.
That is, you cannot take out a larger DHOAS home loan then use the extra funds to make a lump sum deposit back into your DHOAS mortgage, or to use the funds for other purposes such as investing in another property.
If you refinance with DHOAS, you will need to cover the cost of any transfer fees.
Home loan redraws
If you take out a DHOAS home loan that has a redraw facility, and then proceed to make deposits above your minimum monthly repayments, you may draw on those extra repayments. If your loan is paid down to a nil or credit balance at any point, your subsidy payments will cease as the purpose of your home loan is deemed to have changed. This applies even if you immediately redraw the funds.
Please note: If you wish to refinance your DHOAS loan at a later stage and any redrawn funds have not been used for housing related purposes, such as improvements or renovations to your DHOAS property, this may impact your eligibility or entitlement. This is because a DHOAS loan can only be used for the purposes as outlined above.
Transferring entitlement to a different DHOAS home loan and property
You can transfer your DHOAS entitlement to another property. You will need to take out a new DHOAS home loan over the property into which your monthly subsidy can be paid. You will also need to occupy the home for 12 months from the date of your first subsidy payment.
You can only receive a DHOAS subsidy on one home loan, over one property, at any given time.
Please see Reapplying and Reassessmentsfor further details about restarting subsidy on another DHOAS home loan and property.
As DHOAS is intended to help achieve home ownership, the main condition is that you and/or your family occupy your subsidised home for at least 12 months. You need to be occupying the home and holding a valid subsidy certificate before your subsidy payments can commence.
This occupancy requirement can be met by one or more of your dependents if you are away from home.
Posting before home is occupied
If you have received a posting order and know you will be relocating within a year from the time your subsidy payments commence, you can receive subsidy payments until you vacate the property. Once you vacate the property, you will not comply with a condition of the legislation, which is to occupy the home for 12 months from the time you start receiving the DHOAS subsidy.
Posting while home is occupied
If you receive a posting after moving into a DHOAS subsidised property in good faith that you would have stayed for 12 months, then your DHOAS subsidy assistance can continue even though you will relocate and no longer live in the home.
It is very important to advise DVA using a Change of Circumstances form before you make the shift. You must attach a copy of your Posting order with this form. DVA will arrange a reduction 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.
Moving before occupancy requirement is met
If you move out of your subsidised property before you have occupied the home for 12 months you will need to advise DVA (using a Change of Circumstances form). DVA will cancel the DHOAS payments made into your home loan.
If you continue to receive DHOAS payments on the property although you have moved out, you will be required to repay any overpayments.
New or amended DHOAS home loans
If you close your existing DHOAS home loan and take out another loan, either on a new home or over your existing home, you will need to re-apply for a new subsidy certificate and have your DHOAS subsidy payments re-assessed.
In these instances, you will be required to again meet the 12 month occupancy requirement from when you start receiving the new round of subsidy payments. This also applies if you make significant changes to your existing DHOAS home loan, for example, if you increased the balance and you wanted to access a higher subsidy payment.
If you received a waiver on the 12 month occupancy requirement and are receiving the DHOAS subsidy, if you close or change that DHOAS home loan the occupancy waiver will not carry over to the new or changed loan.
Before you close or make changes to your DHOAS home loan you are advised to contact DHOAS for further information, to ensure you understand the impact of these changes.
If you own a home that you have previously resided in for 12 months, but do not occupy currently, this does not mean you can start receiving DHOAS subsidy payments on that home.
You will need to re-occupy the subsidised home for your subsidy payments to commence, and remain in the home for 12 months for the payments to continue.
Refinancing with DHOAS
The 12 month occupancy requirement and other conditions apply to members who are refinancing their home with a DHOAS home loan. This will apply regardless of how long you have lived in the subsidised property to date.
After completion of 12 month 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 rent out the property and still receive your DHOAS subsidy payment, 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.
An exemption to the occupancy requirements may be available to members in some circumstances. This includes members who receive a posting after they have occupied the subsidised home in good faith that they would meet the requirement.
To avoid any disruption to your subsidy payments, you need to request the exemption as soon as possible and before you move out of your subsidised home. Submit the request to DVA using a Change of Circumstances form.
You have two years from when you first start receiving DHOAS subsidy payments to complete the construction process and to occupy the home, if you want your DHOAS subsidy payments to continue. Upon completion of construction, once your property is deemed 'occupiable', you are required to occupy the home for 12 months. If you cannot meet these conditions, your subsidy will stop.
You can re-apply for a new subsidy certificate and re-commence payments when you are able to start occupying the home and remain in the property for 12 months.
For further details, please see Construction Loans.
50% interest in home
It is a requirement that you hold, either alone or with your partner, a 50% or greater interest in the property. This means your ownership in the property is at least 50%, if you share that ownership with another party.
Use of property for business
The DHOAS subsidy cannot be paid on a mortgage over a property which is used primarily for the purpose of carrying on a business, trade or profession.
Based on Sections 35 and 41 of the DHOAS Act, subsidy will cease to be paid if a property is used in this manner.
This rule applies to the use of the home and land regardless of who is carrying on the business. Therefore, it applies to activity carried out by any of the following:
- ADF member
- Any other (for example, a share farmer)
Definition of business
An activity can generally be considered a business if it is carried out for income or profit. The Australian Tax Office (ATO) website has information to assist in determining if a business exists for tax reasons.
DVA would generally expect that the DHOAS treatment, and the tax treatment would align. Therefore, if the activity is reported on a tax return (or would be required under law to be reported on a tax return), has an ABN and is registered for GST, then the business most likely exists for DHOAS purposes.
This excludes genuine hobbies, for example the sale of arts and crafts of a minor nature or non-profit activities such as meetings of Rotary and Apex.
Assessing primary use
There are a number of factors to take into account when determining if a property is used primarily for business.
- Size of business
- Proportion of land used for business
- If customers visit the property, and how many
- The extent to which the business is actually carried out on the property
- The extent to which the property especially caters for the activity
Examples of inconsequential activities that do not impact on DHOAS eligibility:
- Running a gardening services or plumbing business from the house
- Small Amway business for sales to family and friends
- Giving piano lessons two afternoons a week
- A small home office in one room
Examples of primary use that can result in subsidy payments being ceased:
- 500 head of cattle on 300 acres
- Running a larger and specialised professional business, such as a doctor, dentist or veterinary practice
- Running a multi-bedroom B & B (bed and breakfast)
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 bought a home, either to live in or as an investment, while 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 property settlement was before the certificate was issued.
- A maximum of 48 months service credits may be exchanged for a lump sum at the tier 1 level