What Is HPAS?
Of all the current ADF Housing Entitlements HPAS is by far the one we get asked about the most.
For this episode of Coach Talk Property Coach Dane & Property Specialist/ADF Entitlements Expert Dave break down in detail the most up to date information and numbers around HPAS.
How does HPAS work?
HPAS is used to purchase your own home in your current or new posting location. HPAS gets paid into your bank account as a lump sum of $16,949 (before tax).
You can submit your application for HPAS as soon as you have either signed a contract to buy a house or signed a contract to build a house.
– DHOAS, like I mentioned a little bit earlier, is one of those ones that most people generally know about. I do find, though, that a lot of times there is misinformation out there. The boys and the girls, they get talking in the breezeway or the lines and they do get mixed up a little bit sometimes. But hopefully we’ll allay some of those, that misinformation there. So you can see there, it is for current and former ADF members, which means that if you’re in the defense force, and if you’re out of the defense force, it can still be available to you. It is also for your own home ownership, which means that you can’t go and use it to buy an investment property. However, if you’ve gone, purchased your own home to live in, posted out, kept it, you do still keep receiving your DHOAS subsidy. And that essentially becomes a investment property. And like, yeah, you’re getting your rent on top there as well. Now, this number here has changed just recently, as of June just last year. Must’ve served within the last five years. That used to only be two years. So there’s a lot of people out there right now who could be thinking that, “Nah I’ve already gone two years past discharge. It’s lost to me.” Good news. You may still be eligible to use DHOAS, if it’s been within that five years of your discharge. Now, you’ve got a couple of references there for the death grant and the DHOAS Act for that 22 June, when that changed to five years, if you want to check out that. If you do have a break in service, there is the potential there that you may have to start again. There is a qualifying period associated with it. If you have a break in your qualifying period, for over one year, then you may go back to date one. You may go back to zero, end up starting that qualifying period again. There is also the potential there that you have a break in service during your accumulation period. If you have a break there, it generally just means that for whatever period you’ve had a break, it’s generally that you just don’t accumulate your DHOAS subsidy during that period.
– Yep, yep.
– Once you start again, you just started accumulating once again. It’s pretty good. Now, the way they work it out and all the numbers there, it’s worked out on the average house price across all of Australia. So what time they worked out there as of 1 July 2020, the average house price across all of Australia was just over $750,000. In brackets there you’ll see $718,000. That was the average house price for 2019. So you can see we’ve actually gone up about 30 grand since the last one was calculated. Looking forward to June, July 2021 this year to see when it comes.
– 100%. So updated every 12 months, right. And that’s financial years as well.
– Yep. Financial year. Now, the way that the tiers are worked out is based on that average house price. Tier one is 40%. Tier two is 60%. And then tier three is 80% of that average house price. What do those tiers look like? I’m glad you asked. I’ve got it here on another slide.
– Subsidy tiers on the left there. You can see minimum permanent service is four years, eight years for tier two, 12 years for tier three. And then our reserve brothers and sisters there, unfortunately you do get a shafted a little bit. Eight years for qualifying period for tier one, 12 years and then 16 years for tier two and three. When we’re talking about how much you can actually have subsidized, this is what we see in this subsidized loan amount. Tier one is 300,000, two is 450,000, and tier three is $600,000. These numbers here, that’s not the most amount of money that you can buy. The most amount of money you can buy is going to be determined by the lender, by the banks, based on your personal circumstances. These figures here just tell you the maximum amount you’re going to receive a subsidy on. Now, when we also look at your monthly, your maximum monthly subsidy, these are based on the average interest rates and they’re calculated monthly. So for somebody, the guys out there and girls, you might already have a DHOAS loan, you may see your monthly maximum, sorry, your monthly subsidies changing slightly. That’s for that reason. So tier one is up to $198,000, tier two $298,000, and tier three up to $397,000. So if you’ve taken out a loan, and you’re tier three, and your loan is larger than $600,000, you’re going to get that full $397 a month. Not too bad.
– Not bad. Three, four hundred bucks a month. Is it?
– That’s it. Now, unfortunately, as discussed, and we do get a lot of discussion around this, there are only the three banks that you see there that you can use for the subsidy. You have Defense Bank, Australia Military Bank, and The Nab. I know that Dan, in one of the previous sector sections, has already discussed the interest rates and how they can be variable. But, we are seeing some very sharp rates at this point in time, especially with The Nab. A couple of extra points here which aren’t really common knowledge for a lot of people. The most, or the maximum subsidy that you can receive is up to 20 years. If you wait until tier three the amount that you’re going to get there, based on that maximum amount there, at 397, is about $95,000. That’s pretty good.
– Better than a kick in the teeth I always say. As interest rates go up and down, that amount there can change. So as interest rates go up and those monthly subsidies change, that can increase there. And what we do have is the ability there to get an additional five years if you do have ‘Warlike’ service. They have broken it over a few months. So three, six, and nine months. Based on giving you that maximum five years. So potentially one or two deployments overseas would get you up to that additional five years. Unfortunately, the five years of additional war service doesn’t go towards your accrual phase. You still need to meet your normal four years, eight, or 12 to give you subsidy tiers. It just tacks on to the back end, gives you a little bit extra time of receiving that subsidy. Now I speak great caution here. If you do have a DHOAS subsidized loan and you discharge with, if you don’t do more than 20 years, you are going to revert back to tier one.
– That can trip a lot of people up. So they do have to be aware.
– Yeah, it isn’t common knowledge, right? A lot of people think once they hit that tier that’s where they remain. But no. 20 years is the magic number.
– So if you are considering discharge and you are close to that 20 years try and stick it out. Alternatively there’s another way they can meet those dates.
– 100%. So if you are going to go into the ACU reserve, 20 days is your magic number. If you’re not going to satisfy 20 day, you aren’t going to keep ticking up your tiers. So just remember that when you get out and go like, “Oh I want to do 10 days.” Or whatever like that, that is going to negatively affect you. 20 days is the magic number, okay? So make sure you’re doing that. It also goes into your private health as well, you get 600 bucks. Not bad either. But make sure you just hit that tier limit there at 20 days.
– And one of the other elements of DHOAS as well is the ability to receive a lump sum. Now, the way they do that is they take a portion of your entitlement and convert it to a lump sum. You can only take up to a maximum four years, though. So, for example, if you did want to take the full four years as a lump sum, then you would have to have served eight as a full-time member. Four years for your qualifying period, and then four years to convert that to your lump sum money. Now, unfortunately, even if you have served and you’ve got your tier two or tier three, it’s only going to be paid out tier one. So you have to weigh up whether it’s more beneficial to receive that money as a lump sum, or to just leave it there bubbling away, and then potentially get on tier two or tier three, and get a bit more money that way. Now, we’ve done some numbers here for you, based on the current entitlements. $198 a month over the four years, about nine and a half grand.
– Not bad.
– Not bad, it isn’t taxed. It’s a tax free number. However, it is a fringe benefits tax. So once again, if you’re on family benefit, AOB, paying child care benefits, or something like that, it may affect those numbers. So make sure you do talk to an accountant if you are considering that as well. Now, it can’t be used as, as your deposit because it’s not going to get paid to you until you actually have your first DHOAS subsidy claim there as well. That is generally after you’ve drawn down from the loan. Now, another note here as well. If you have owned an ‘occupied home’ before, then unfortunately you can’t get DHOAS subsidy as a lump sum.
– What I do want to make very clear, though, is even if you have owned an investment property before, or your own home, all of these ADF housing entitlements are still available to you.
– You don’t lose them just because you’ve lived in or bought investment property before. It’s only this lump sum here which is affected.
– Just stick it back on the shelf, right?
– That’s it.
This information is not to be taken as legal or financial advice, please see the disclaimer page for full information.