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49/1996 Cancellation of Subsidy in Deceased Estate Cases

Document

National Office Instruction

amending DSH General Orders (1993 edition)

Instruction No. 49
Date of Effect: On receipt

CANCELLATION OF SUBSIDY IN DECEASED ESTATE CASES


Purpose

The purpose of this instruction is to clarify the policy to be applied in cancelling the subsidy payable in respect of a subsidised loan where the subject property is part of a deceased estate and there is no surviving spouse.

Background

The change to the administration of Defence Service Homes (DSH) subsidised loans to allow the cancellation of subsidy in deceased estate cases was announced in the May 1995 Budget. The amending legislation received Royal Assent on 14 November 1995. The amendments providing for cancellation of subsidy in deceased estate cases came into effect on the same day.

There are currently cases where there is a leakage of the benefit of DSH subsidised loans to ineligible persons. This occurs in deceased estates where there is no surviving eligible beneficiary.

The general thrust of section 22 of the Defence Service Homes Act 1928 (the Act) is to require the issue of a Certificate of Entitlement in respect of any proposed transfer of property which is subject to either a specified portfolio asset vested in the Westpac Banking Corporation (the Bank) or other security securing a subsidised advance. Subsection 22(3) of the Act specifically requires that a Certificate of Entitlement under section 22 may only be issued to a proposed transferee who is an eligible person. Under subsection 22(4) such a Certificate of Entitlement remains in force until the subsidy to which it relates ceases to be payable under the Act.

However, subsection 22(7) of the Act permits certain transfers to take place without a Certificate of Entitlement, including actions necessary to assist in the administration of deceased estates. A delay in the administration of the estate has to date, allowed the benefit of the subsidised loan to continue. As a result, ineligible persons have been receiving subsidised loan benefits under the DSH Act.

Policy to be applied

The Veterans' Affairs (1995-96 Budget Measures) Legislation Amendment Act 1995 inserted a new Section 27A into the Defence Service Homes Act 1918. Section 27A provides for the cancellation of a subsidy three months from the date of death of the last surviving member of a 'veteran/ spouse couple'. The legislation also provides for the Bank, upon cancellation of subsidy, to charge an interest rate in relation to the advance that is an interest rate applicable to similar loans provided by the Bank to mortgagors generally.

The powers of the Secretary are discretionary. As a matter of policy, the power is to be exercised in every case unless there are special circumstances. Special circumstances may be considered to exist where the deceased is survived by dependants who were dependent upon the deceased for their housing needs at the time of death. As an example, it is not intended that subsidy will be cancelled where the deceased veteran and widow are survived by children who are minors or who have a disability to the extent that they were dependent upon the deceased for their housing needs immediately before the death of the last surviving parent.

Staff will need to be sensitive to the needs of clients when dealing with cases involving cancellation of subsidy. Following advice of the death of the last surviving member of a 'veteran /spouse couple', the file should be carefully examined for evidence which might suggest the presence of special circumstances. In those cases where the subsidised loan is in a single name, the file should also be examined for evidence of a surviving spouse. In both instances, reference should be made to the Departmental CMS mainframe system, Insurance records and any other source available.

Procedures for handling these cases have been drafted according to whether the circumstances attracting cancellation of subsidy occurred before ("existing cases") or after ("future cases") the effective date of this NOI. Please see Attachments A and B.

Delegates will be expected to use their discretion in the timing of the initial advice to the estate and for any requests for an extension of time before cancellation. Special circumstances have not been defined and the examples given are not exhaustive. Claims for special circumstances should be treated sensitively and consistent with the philosophy supporting beneficial legislation. Decisions to cancel subsidy are reviewable decisions.

In the event of a successful claim for special circumstances, delegates may, having regard to the particular circumstances of the case, set a review period or require advice of changed circumstances to be provided.

Advice to Westpac Banking Corporation

The Bank should be kept advised at all stages of the process. Early advice of our intention to cancel subsidy will allow the Bank the opportunity of recapturing outgoing business. Advice to the Bank of cancellation of subsidy is a legislative requirement.

Standard Letters System

Basic letters and the Notice of Cancellation have been included in the Standard Letters System. Samples are shown at Attachments C - G.

Reporting

In order to gauge the impact of this NPP a reporting format has been included with this NOI. This manual report, shown at Attachment H, will be replaced by a system generated one when the Management Information Module of NewCELS is introduced. Please forward a copy of the report to this office each month until further notice.

General Orders

An amended Entitlement GO 10.14 is attached. Please replace the existing version with the amendment. Subsidy Administration GO 6.2.2.1 which was issued under NOI 47 of 25 January 1996 also refers.

Effect on previously issued NOI's

This instruction has no effect on any previously issued effective National Office Instruction.

KERRY BLACKBURN
Branch Head

Housing & Community Services

12 July 1996


Attachment A

CANCELLATION of SUBSIDY - DECEASED ESTATES

PROCEDURES: EXISTING CASES

1. Arrange for MT (or equivalent) to run program which will report all deceased estate cases within financial groupings. (Suggested break-up: less than $1,000; $1,000 - $5,000; $5001 - $9,999; equal to or greater than $10,000. Case action would start with the equal to or greater than $10,000 group and work down to the less than $1,000 group. By the time cancellation action reaches cases in the last group, a number of these cases will have discharged automatically. (A refinement could include breaking the last group into $1 - $499 and $500 - $999.)

2. Obtain files and peruse available information to determine that a surviving spouse does not exist. Reference should be made to the Departmental mainframe system CMS, Insurance records and any other source available. If prima facie evidence shows that special circumstances may exist, further investigation should be undertaken. It is not necessary to issue a formal 'Letter of Intention to Cancel Subsidy' for the purpose of gaining information. A delegate should try to obtain sufficient information to determine that special circumstances exist before a formal letter is issued.

3. The 'Letter of Intention to Cancel Subsidy' is contained within the Standard Letters System. The letter should be completed according to the circumstances of the case and addressed to the Executor/Administrator/person responsible for managing the property. A copy of the letter should be sent to the DSH Westpac Liaison Unit in Sydney to give the Bank sufficient warning of the change. (Clause 11.16 of the Agreement refers.) After dispatch, the file may be resubmitted for two weeks.

No Claim for Special Circumstances

4. Once 2 weeks from the date of the Letter of Intention to Cancel Subsidy has passed, a formal Notice of Cancellation of Subsidy should be sent, and a copy forwarded to the DSH Westpac Liaison Unit in Sydney. Subsidy will be cancelled with effect from the date in the Notice (being a date 3 months from the date of the first 'Letter of Intention to Cancel Subsidy').

5. The decision to cancel is a reviewable decision under section 43 of the DSH Act, and may therefore be reviewable by the AAT. Accordingly, the letter enclosing the formal Notice of Cancellation of Subsidy should include details of appeal rights.

6. In the event that the appeal process (Internal Review & AAT) is finalised in favour of DSH after the date set out in the Letter of Intention to Cancel Subsidy, subsidy will be cancelled with effect from the next subsidy claim. A formal Notice of Recovery of Subsidy will need to be prepared and forwarded to the Executor/Administrator/person responsible for managing the property recovering subsidy paid between the date set out in the Notice of Cancellation of Subsidy and the date when subsidy will cease.

Claim for Special Circumstances Received

7. If a claim for special circumstances is made, a delegate should review the details, including undertaking any further investigation if required. If the circumstances are not regarded as 'special', advice of the decision to cancel subsidy, including a Statement of Reasons, should be forwarded to the claimant together with advice of appeal rights and a formal Notice of Cancellation of Subsidy.

8. In the event that the appeal process (Internal Review & AAT) is finalised in favour of DSH after the date set out in the Letter of Intention to Cancel Subsidy, subsidy will be cancelled with effect from the next subsidy claim. A formal Notice of Recovery of Subsidy will need to be prepared and forwarded to the Executor/Administrator/person responsible for managing the property recovering subsidy paid between the date set out in the Notice of Cancellation of Subsidy and the date when subsidy will cease.

9. Should the claim for special circumstances succeed, advice that subsidy will continue is to be forwarded to the Executor/Administrator/person responsible for managing the property. Similar advice should be forwarded to Westpac.

Attachment B

CANCELLATION of SUBSIDY - DECEASED ESTATES

PROCEDURES: FUTURE CASES

1. Receive advice of death of survivor or sole tenant. Obtain file and peruse available information. (In sole tenant cases, to determine that a surviving spouse does not exist.) Reference should be made to the Departmental mainframe system CMS, Insurance records and any other source available. If prima facie evidence shows that special circumstances may exist, further investigation should be undertaken. A delegate should try to obtain sufficient information to determine that special circumstances exist before a formal letter is issued.

2. The Letter of Intention to Cancel Subsidy should be forwarded to the personal representative of the Estate approximately six weeks after the date of death. This is considered to be a reasonable period following the death of the client.

3. The Letter of Intention to Cancel Subsidy is contained within the Standard Letters System. The letter should be completed according to the circumstances of the case. A copy of the letter should be sent to the DSH Westpac Liaison Unit in Sydney to give the Bank sufficient warning of the change. (Clause 11.16 of the Agreement refers.) After dispatch, the file may be resubmitted for two weeks.

No Claim for Special Circumstances

4. Once two weeks from the date of the Letter of Intention to Cancel Subsidy has passed, a formal Notice of Cancellation of Subsidy should be sent, and a copy forwarded to the DSH Westpac Liaison Unit in Sydney. Subsidy will be cancelled with effect from the date in the Notice (being a date 3 months from the date of death).

5. The decision to cancel is a reviewable decision under section 43 of the DSH Act, and may therefore be reviewable by the AAT. Accordingly, the letter enclosing the formal Notice of Cancellation of Subsidy should include details of appeal rights.

6. In the event that the appeal process (Internal Review & AAT) is finalised in favour of DSH after the date set out in the Letter of Intention to Cancel Subsidy, subsidy will be cancelled with effect from the next subsidy claim. A formal Notice of Recovery of Subsidy will need to be prepared and forwarded to the Executor/Administrator/person responsible for managing the property recovering subsidy paid between the date set out in the Notice of Cancellation of Subsidy and the date when subsidy will cease.

Claim for Special Circumstances Received

7. If a claim for special circumstances is made, a delegate should review the details, including undertaking any further investigation if required. If the circumstances are not regarded as 'special', advice of the decision to cancel subsidy, including a Statement of Reasons, should be forwarded to the claimant together with advice of appeal rights and a formal Notice of Cancellation of Subsidy.

8. In the event that the appeal process (Internal Review & AAT) is finalised in favour of DSH after the date set out in the Letter of Intention to Cancel Subsidy, subsidy will be cancelled with effect from the next subsidy claim. A formal Notice of Recovery of Subsidy will need to be prepared and forwarded to the Executor/Administrator/person responsible for managing the property recovering subsidy paid between the date set out in the Notice of Cancellation of Subsidy and the date when subsidy will cease.

9. Should the claim for special circumstances succeed, advice that subsidy will continue is to be forwarded to the Executor/Administrator/person responsible for managing the property. Similar advice should be forwarded to Westpac.


Attachment C

INTENTION TO CANCEL SUBSIDY

(EXISTING CASES)

DSH Subsidised Loan Property: ADDRESS
Westpac Account No.(s):

I am writing to advise you of changes to the administration of Defence Service Homes (DSH) subsidised loans which will affect you. These changes were announced in the May 1995 Budget and came into effect on 14 November 1995 when the amending legislation received Royal Assent.

As a result, the Defence Service Homes Act 1918 (the Act) now provides for the cancellation of subsidy from a date three months after the death of the last surviving member of an eligible couple. This is intended to prevent the leakage of the benefit of a DSH subsidised loan to ineligible persons. This occurs in deceased estates where there is no surviving eligible beneficiary.

Our records indicate that the DSH subsidised loan was originally granted in YEAR to FULL NAME OF ELIGIBLE PERSON and FULL NAME OF SPOUSE. Subsequently, XXXX died in YEAR and YYYY died in YEAR. Currently, the property at ADDRESS is in the name of the DECEASED ESTATE and you are the Executor / Administrator / person responsible for managing the property. The amount of subsidised loan(s) outstanding is $$$$.cc as at DATE.

Optional - (Single Name - No Known Spouse) Our records indicate that the DSH subsidised loan was originally granted in YEAR to FULL NAME OF ELIGIBLE PERSON. Subsequently, XXXX died in YEAR. Currently, the property at ADDRESS is in the name of the DECEASED ESTATE and you are the Executor/Administrator/person responsible for managing the property. The amount of subsidised loan(s) outstanding is $$$$.cc as at DATE.

Optional - (Single Name Following Transfer) Our records indicate that the DSH subsidised loan was transferred in YEAR to FULL NAME OF ELIGIBLE PERSON following the death of FULL NAME OF SPOUSE. Subsequently, XXXX died in YEAR. Currently, the property at ADDRESS is in the name of the DECEASED ESTATE and you are the Executor/Administrator/person responsible for managing the property. The amount of subsidised loan(s) outstanding is $$$$.cc as at DATE.

Please note that, in accordance with the provisions of the Act, it is our intention to cancel the subsidy payable in respect of the subsidised loan secured over the property at ADDRESS. Formal notice of the cancellation will be issued to you shortly to take effect three months after the date of this letter. This period of time should be sufficient to allow you to make whatever financial arrangements may be considered necessary before subsidy is cancelled.

The Secretary of the Department of Veterans' Affairs has a discretion not to cancel subsidy in special circumstances. As an example, it is not intended that subsidy should be cancelled where the deceased veteran and widow are survived by children who are minors, or who have a disability to the extent that they were dependent upon the deceased for their housing needs immediately before the death of the last surviving parent. If you believe that special circumstances exist in your case, please advise me in writing within 14 days.

In the event of cancellation of subsidy, the legislation provides that Westpac Banking Corporation may charge an interest rate in relation to the amount outstanding that is applicable to similar loans provided by the Bank. That is, the loan may be continued but at the current Bank interest rate and without the Commonwealth subsidy from the Defence Service Homes Scheme or the loan may be terminated, in which case you would need to apply for a new loan. Alternatively, you may wish to discharge the loan completely, or re finance the loan through another lending institution. You should discuss your options with a loans officer at your local Westpac Branch. The Bank has been advised of our intention to cancel subsidy. Please advise me of your decision as soon as possible.

If you have any questions regarding this letter, please do not hesitate to contact me on the telephone number at the top of this letter. Country callers may use Freecall NUMBER.


Attachment D

INTENTION TO CANCEL SUBSIDY

(FUTURE CASES)

DSH Subsidised Loan Property: ADDRESS
Westpac Account No.(s):

I understand that you are the Executor/Administrator/person responsible for managing the property for the Estate of the late FULL NAME. Please accept my condolences on your recent bereavement.

I am writing to advise you of changes to the administration of Defence Service Homes (DSH) subsidised loans which will affect you. These changes were announced in the May 1995 Budget and came into effect on 14 November 1995 when the amending legislation received Royal Assent.

As a result, the Defence Service Homes Act 1918 (the Act) now provides for the cancellation of subsidy from a date three months after the death of the last surviving member of an eligible couple. This is intended to prevent the leakage of the benefit of a DSH subsidised loan to ineligible persons. This occurs in deceased estates where there is no surviving eligible beneficiary.

Our records indicate that the DSH subsidised loan was originally granted in YEAR to FULL NAME OF ELIGIBLE PERSON and FULL NAME OF SPOUSE. Subsequently, XXXX died in YEAR and YYYY died in YEAR. The amount of subsidised loan(s) outstanding is $$$$.cc as at DATE.

Optional - (Single Name - No Known Spouse) Our records indicate that the DSH subsidised loan was originally granted in YEAR to FULL NAME OF ELIGIBLE PERSON. Subsequently, XXXX died in YEAR. The amount of subsidised loan(s) outstanding is $$$$.cc as at DATE.

Optional - (Single Name Following Transfer) Our records indicate that the DSH subsidised loan was transferred in YEAR to FULL NAME OF ELIGIBLE PERSON following the death of FULL NAME OF SPOUSE. Subsequently, XXXX died in YEAR. The amount of subsidised loan(s) outstanding is $$$$.cc as at DATE.

Please note that, in accordance with the provisions of the Act, it is our intention to cancel the subsidy payable in respect of the subsidised loan secured over the property at ADDRESS. Formal notice of the cancellation will be issued to you shortly to take effect three months after the date of death of XXXX. This period of time should be sufficient to allow you to make whatever financial arrangements may be considered necessary before subsidy is cancelled.

The Secretary of the Department of Veterans' Affairs has a discretion not to cancel subsidy in special circumstances. As an example, it is not intended that subsidy should be cancelled where the deceased veteran and widow are survived by children who are minors, or who have a disability to the extent that they were dependent upon the deceased for their housing needs immediately before the death of the last surviving parent. If you believe that special circumstances exist in your case, please advise me in writing within 14 days.

In the event of cancellation of subsidy, the legislation provides that Westpac Banking Corporation may charge an interest rate in relation to the amount outstanding that is applicable to similar loans provided by the Bank. That is, the loan may be continued but at the current Bank interest rate and without the Commonwealth subsidy from the Defence Service Homes Scheme or the loan may be terminated, in which case you would need to apply for a new loan. Alternatively, you may wish to discharge the loan completely, or re finance the loan through another lending institution. You should discuss your options with a loans officer at your local Westpac Branch. The Bank has been advised of our intention to cancel subsidy. Please advise me of your decision as soon as possible.

If you have any questions regarding this letter, please do not hesitate to contact me on the telephone number at the top of this letter. Country callers may use Freecall NUMBER.


Attachment E

LETTER OF CANCELLATION

(NO ADVICE FROM ESTATE)

DSH Subsidised Loan Property: ADDRESS
Westpac Account No.(s):

I refer to my letter of DATE advising you of my intention to cancel the subsidy payable in respect of the subsidised loan(s) secured over the property at ADDRESS.

From a perusal of our records I have found that the requirements of section 27A of the Defence Service Homes Act 1918 (the Act) have been met. That is to say, the eligible person and spouse, who were the original borrowers, are both deceased. No claim in writing regarding special circumstances has been received in this office.

(Optional - Single Name - No Known Spouse) From a perusal of our records I have found that the requirements of section 27A of the Defence Service Homes Act 1918 (the Act) have been met. That is to say, the person, who was the original borrower, is deceased, and there is no evidence of a surviving spouse. No claim in writing regarding special circumstances has been received in this office.

(Optional - Single Name Following Transfer) From a perusal of our records I have found that the requirements of section 27A of the Defence Service Homes Act 1918 (the Act) have been met. That is to say, the eligible person, who was the borrower following transfer, is deceased, and there is no evidence of a surviving spouse. No claim in writing regarding special circumstances has been received in this office.

Therefore, in accordance with the provisions of the Act, I have determined that the subsidy payable in respect of the subsidised loan(s) secured over the property will be cancelled with effect from DATE (3 months from date of first letter of intent for existing cases and 3 months from date of death for future cases). A copy of the formal Notice of Cancellation is enclosed, which has also been forwarded to Westpac Banking Corporation.

You have a right to apply for a review of this decision by a senior delegate of the Secretary of the Department of Veterans' Affairs. Should you decide to apply you must do so in writing within 30 days of receipt of this advice and send your application to:

The Secretary
Department of Veterans' Affairs
ADDRESS


Attachment F

LETTER OF CANCELLATION

(SPECIAL CIRCUMSTANCES CLAIMED)

DSH Subsidised Loan Property: ADDRESS
Westpac Account No.(s):

I refer to your letter of DATE which detailed the circumstances you provided in support of your claim for continuing the subsidy payable in respect of the subsidised loan(s) secured over the above property. I have reviewed the information you have provided in the light of the policy pertaining to the legislation.

From a perusal of our records I have found that the requirements of section 27A of the Defence Service Homes Act 1918 (the Act) have been met. That is to say, the eligible person and spouse, who were the original borrowers, are both deceased.

Optional - (Single Name - No Known Spouse) From a perusal of our records I have found that the requirements of section 27A of the Defence Service Homes Act 1918 (the Act) have been met. That is to say, the eligible person, who was the original borrower, is deceased, and there is no evidence of a surviving spouse.

Optional - (Single Name Following Transfer) From a perusal of our records I have found that the requirements of section 27A of the Defence Service Homes Act 1918 (the Act) have been met. That is to say, the eligible person, who was the borrower following transfer, is deceased, and there is no evidence of a surviving spouse.

In considering your claim, I have concluded that your particular circumstances could not be construed as special circumstances. My reasons for this decision are attached.

Therefore, in accordance with the provisions of the Act, I have determined that the subsidy payable in respect of the subsidised loan(s) secured over the property will be cancelled with effect from DATE (3 months from date of first letter of intent for existing cases and 3 months from date of death for future cases). A copy of the formal Notice of Cancellation is enclosed, which has also been forwarded to the Westpac Banking Corporation.

You have a right to apply for a review of this decision by a senior delegate of the Secretary of the Department of Veterans' Affairs. Should you decide to apply you must do so in writing within 30 days of receipt of this advice and send your application to:

The Secretary
Department of Veterans' Affairs
ADDRESS


Attachment G

DEFENCE SERVICE HOMES ACT 1918

NOTICE OF CANCELLATION

TO: Executor/Administrator/person responsible for managing the property

ADDRESS:

In accordance with Section 27A of the Defence Service Homes Act 1918 I, (FULL NAME OF DELEGATE), a Delegate of the Secretary of the Department of Veterans' Affairs, HEREBY GIVE NOTICE that the subsidy payable in respect of the subsidised loan(s) secured over the property at (ADDRESS) shall be cancelled on the DATE.

Dated this DD day of MONTH YEAR

(NAME OF DELEGATE)
Delegate of the Secretary of the
Department of Veterans' Affairs


Attachment H

CANCELLATION of SUBSIDY

DECEASED ESTATES MONTHLY REPORT

Month:

TARGET BASE

Cases Identified

Cumulative

Database search

After File Examination

CURRENT WORK

Letters of Intent Sent

Appeals Received

Cancellation Notices Sent

This Month

Cumulative

This Month

Cumulative

This Month

Cumulative

SUBSIDY CANCELLED

File No.

Name

Acct No/s

Loan Type

Date of Effect

Balance

Limit Reduction Amount

Last Subsidy Amount

Balance of Term

APPEALS SUCCESSFUL

File No.

Name

Acct No/s

Loan Type

Balance

Last Subsidy Amount

Balance of Term

Reasons

Note: Manual recording will need to continue each month please until the implementation of NewCels.