(See Section 4 Payment of Subsidy regarding cessation of payment of subsidy when DHOAS loan obtained.)
Section 26. (1) Where the Commonwealth is paying subsidy on a subsidised advance to a person, or the assignee of a person and the Secretary is satisfied that:
a) a certificate of entitlement in relation to that advance was issued to the person as a result of a false statement made by the person or the assignee of the person;
aa) a certificate of assignment in relation to that advance was issued to the person as a result of a false statement made by the person or the assignee of the person; or
b) the person was not, when a certificate of entitlement in relation to the advance was issued to the person, entitled to the certificate; or
ba) the person was not, when a certificate of assignment in relation to the advance was issued to the person, entitled to the certificate; or
c) the person, or the assignee of the person, used the advance for a purpose other than that for which it was made; or
d) where the person is a transferee—the person has, without reasonable excuse, failed to comply with an undertaking given by the person to the Secretary under subsection 22(2);
the Secretary may, by notice of cancellation given to the person, cancel the subsidy on the date specified in the notice, being a date not earlier than the date of the notice.
(2) Where:
(a)the Commonwealth is paying subsidy on a specified portfolio asset which vests in the Bank under section 6B or a subsidised advance: and
(b)the Secretary is satisfied that the person in respect of whom the subsidy is being paid has agreed or arranged to transfer the relevant land, land and dwelling-house or right of residence in a retirement village, by a transfer that is subject to:
(i)that specified portfolio asset; or
(ii)the mortgage securing that advance; or
(iii)in the case of a right of residence in a retirement village—any other security that the Bank has in relation to that advance;
as the case may be, to a person who is not a transferee;
the Secretary may, by notice of cancellation given to the first-mentioned person, cancel the subsidy on the date specified in the notice, being a date not earlier than the date of the notice.
(2A) If:
(a)a person has obtained a right of residence in a retirement village; and
(b)the person is a borrower in relation to that right of residence and is liable to pay the outstanding amount of a subsidised advance in respect of which subsidy is payable; and
(c)the Bank has no security for the subsidised advance; and
(d)the Secretary is satisfied that the person has agreed or arranged to transfer the right of residence, while the person's liability under paragraph (b) remains, to a person who is not a transferee;
the Secretary may, by notice of cancellation given to the first-mentioned person, cancel the subsidy on the date specified in the notice, being a date not earlier than the date of the notice.
(2B) If:
(a)the Commonwealth is paying subsidy on an assigned advance; and
(b)the Secretary is satisfied that:
(i)the assignor has agreed to transfer the right of residence in the retirement village, or has given up the right of residence in the retirement village; or
(ii)the assignee has agreed to transfer all or part of his or her interest in the retirement village, or has terminated the assignor's right of residence in the retirement village;
the Secretary may, by notice of cancellation given to the assignor, cancel the subsidy on the date specified in the notice, being a date not earlier than the date of the notice.
(2C) If the Secretary cancels a subsidy under subsection (2B), the Bank may, from the date when the cancellation of subsidy takes effect, 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.
(3) Where the Commonwealth is paying subsidy on a specified portfolio asset or a subsidised advance and the Bank takes action to enforce:
(a)the asset; or
(a)the mortgage securing the advance; or
(a)in the case of a right of residence in a retirement village—any other security that the Bank has in relation to that advance;
but does not, within 3 months after starting that action, recover the outstanding balance secured under the asset, or the outstanding balance of the advance, as the case may be, the Secretary may, by notice of cancellation given to the relevant borrower, purchaser or transferee, cancel the subsidy on the date specified in the notice, being a date not earlier than the date of the notice.
(4) Where the Commonwealth is paying subsidy in respect of 2 persons and one of those persons becomes the spouse or de facto partner of the other person, the Secretary may, by notice of cancellation given to one of those persons, cancel the subsidy in respect of that person on the date specified in the notice, being a date not earlier than the date of the notice.
(5) The Secretary shall cause a copy of a notice of cancellation to be given:
(a)to the Bank; and
(b)in the case of an assigned advance - to the assignee.
(6) Where the Secretary cancels subsidy under this section, that subsidy ceases to be payable on the date specified in the notice of cancellation.
(7) Where:
(a)the Commonwealth is paying subsidy on a subsidised advance to a person, or to the assignee of a person, in relation to the person's retirement village accommodation; and
(b)the person's right of residence in the retirement village is terminated for any reason and the person ceases to reside in the retirement village accommodation;
the Secretary may cancel the subsidy by written notice given to the person.
(8) The cancellation takes effect on the date specified in the notice, being a date not earlier than the date of the notice.
(9) If:
(a)the person's right of residence is terminated; and
(b)the person has a right of review of, or appeal against, the decision to terminate;
the termination is taken, for the purposes of subsection (7), not to occur until:
(c)the review or appeal has been finally determined and the person has ceased to reside in the retirement village accommodation; or
(d)the period within which such an appeal or review could be instituted has ended without an appeal or review having been instituted and the person has ceased to reside in the retirement village accommodation.
Section 27. (1) Where the Commonwealth is paying subsidy in relation to a specified portfolio asset entered into by a person and the Secretary is satisfied that:
(a)the person obtained the benefit of any advance or assistance secured by that asset as a result of a false statement made by the person;
(b)the person was not, when he or she received that benefit, entitled to do so;
(c)the person used the amount secured by the asset for a purpose other than that for which it was made; or
(d)the person has, without reasonable excuse, failed to comply with an undertaking given, or taken to have been given, by the person to the Secretary under subsection 22(2);
and the Secretary decides that the subsidy should be cancelled, the Secretary shall, under subclause 11.16 of the agreement, give the Bank one month's notice of the intended cancellation of the subsidy.
(2) Where the Secretary gives the Bank a notice under subsection (1), the subsidy to which the notice relates shall be taken to have been cancelled, and ceases to be payable, at the end of any period during which the Commonwealth is required to continue paying subsidy under subclause 11.16 of the agreement.
(3) The Secretary shall cause a copy of a notice under subsection (l) to be given to the relevant purchaser, borrower or transferee.
(4) Where subsidy ceases to become payable under this section the Secretary shall notify the relevant purchaser, borrower or transferee accordingly.
27A (1) Subject to subsection (3), the Secretary may cancel subsidy on a subsidised advance in respect of a person, or the assignee of a person, if:
(a)the person has died; and
(b)3 months has elapsed from the date on which the person died; and
(c)the Secretary is satisfied that there is no surviving spouse or de facto partner of the person, to whom a certificate of entitlement could be issued under section 22, in relation to the land or land and dwelling-house concerned, or in relation to the right of residence in the retirement village concerned (as the case requires); and
(d)the Secretary considers it appropriate to cancel the subsidy.
(2) Subject to subsection (3), the Secretary may cancel subsidy in relation to a portfolio asset entered into by a person if:
(a)the person has died; and
(b)3 months has elapsed from the date on which the person died; and
(c)the Secretary is satisfied that there is no surviving spouse or de facto partner of the person, to whom a certificate of entitlement could be issued under section 22, in relation to the land or land and dwelling-house concerned, or in relation to the right of residence in the retirement village concerned (as the case requires); and
(d)the Secretary considers it appropriate to cancel the subsidy.
(3) If subsidy is being paid in respect of a 2 persons who are spouses or de facto partners of each other who, under subsection 4A(1), are treated together as an eligible person for the purposes of this Act, the Secretary may only cancel subsidy under subsection (1) or (2) if:
(a)both the wife and husband have died; and
(a)3 months has elapsed from the death of the spouse or de facto partner who died last.
(4) If the Secretary cancels subsidy under subsection (1) or (2), the Secretary must:
(a)give a notice of cancellation to the executor or personal representative of the person who has died; and
(b)give a copy of the notice of cancellation to the Bank; and
(c)in the case of an assigned advance - give a copy of the notice of cancellation to the assignee.
(5) The cancellation takes effect, and the subsidy concerned ceases to be payable, on the date specified in the notice, being a date not earlier than the date of the notice.
(6) If the Secretary cancels subsidy under subsection (1) or (2), the Bank may, from the date when the cancellation of subsidy takes effect, 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.
11.15Termination/Suspension of Subsidy Payments and Recovery of Subsidy from Borrower
Notwithstanding the provisions of any other Clause in this Agreement, the Commonwealth may elect to recover from the Borrower in the manner provided for under the Amended Act or may terminate and/or suspend future Subsidy payments in respect of the following:
(a)a Borrower who, having obtained a Subsidised Advance pursuant to the Amended Act, a Portfolio Contract of Sale or a Corporation Advance under a Specified Portfolio Asset, is discovered to have made a false statement in order to obtain a Certificate of Entitlement, a Portfolio Contract of Sale or a Corporation Advance;
(i)is discovered not to have been entitled to a Certificate of Entitlement, a Portfolio Contract of Sale or a Specified Portfolio Asset at the time when the Certificate of Entitlement was issued to the Borrower or the Corporation Advance secured by the Specified Portfolio Asset was received by the Borrower or the Portfolio Contract of Sale was executed by the Borrower;
(ii)purports to transfer a holding without a Certificate of Entitlement having been issued which provides for Commonwealth consent to the Transfer of Land and Subsidy to the proposed transferee;
(iii)is discovered to have used the Subsidised Advance or Corporation Advance for a purpose other than that for which it was made;
(iv)is a transferee of a holding in respect of which the Commonwealth has issued a Certificate of Entitlement consenting to a Transfer of Land and Subsidy and has without reasonable excuse failed to comply with an undertaking given by that transferee under Sub-section 22(2) of the Amended Act; or
(v)becomes the husband or wife of another Borrower,
(vi)is discovered to have sold a 'holding' or 'retirement village accommodation' to which subsidy relates and has not acquired another 'holding' or 'retirement village accommodation' as a substituted security within six months in accordance with Sub-clause 11.2A.
(b)where the Bank takes action to enforce a Portfolio Contract of Sale or a security for which the Subsidised Advance or a Corporation Advance was provided and the Bank has not within three (3) months sold the property and discharged the loan outstanding to it thereon; or
(c)where an assignor has agreed to transfer a right of residence in a Retirement Village, or has given up a right of residence in a Retirement Village; or
(d)where the assignee has agreed to transfer all or part of his or her interest in a Retirement Village, or has terminated the assignor's right of residence in a Retirement Village.
11.15A Termination of Subsidy Payments and Recovery of Subsidy from the Estate Following Death of the Eligible Person and/or Spouse.
Notwithstanding the provisions of any other Clause in this Agreement, where Subsidy is terminated in accordance with Section 27A of the Defence Service Homes Act 1918 the Commonwealth may elect to recover from the estate of the Borrower in the manner provided for under the Act.
11.16 — Notice of termination of Subsidy payments to Bank
Where the Commonwealth elects to terminate future Subsidy payments to the Bank in respect of a Specified Portfolio Asset pursuant to Sub-clause 11.5(a) then it shall give the Bank one month's notice of its intention to do so. If prior to the completion of that one month period the Bank gives the Commonwealth notice that it intends to take action to enforce its security with respect to that Specified Portfolio Asset then the Commonwealth shall continue to pay Subsidy until the Bank has discharged its loan, or for three (3) months, whichever is the earlier. Any Subsidy paid to the Bank which is recoverable from the Borrower pursuant to the Amending Act shall be paid to the Commonwealth by the Bank as required by the Amending Act from any moneys due to the Borrower from the proceeds of any sale by the Bank of his land or land and dwelling house.
11.17 — Entitlement of Bank to charge applicable interest rate for Subsidised Advances
The Commonwealth acknowledges that it shall be a term of any Subsidised Advance made by the Bank to a Borrower that in the event that Subsidy is, for any reason whatsoever, terminated by the Commonwealth in respect of that advance, the Bank shall be entitled to charge the interest rate applicable to similar loans provided by the Bank to borrowers generally from the date of termination of Subsidy and for that purpose the Bank may close the Subsidised Advance Loan Account and open a new account in the name of the Borrower.
11.18 Entitlement of Bank to charge applicable interest rate for Specified Portfolio Assets
The Commonwealth acknowledges that following Royal Assent to the Veterans' Affairs (1995-96 Budget Measures) Legislation Amendment Act 1995, it shall be a term of any Specified Portfolio Asset which vested in the Bank that in the event that Subsidy is, for any reason whatsoever, terminated by the Commonwealth in respect of that Specified Portfolio Asset, the Bank shall be entitled to charge the interest rate applicable to similar loans provided by the Bank to borrowers generally from the date of termination of Subsidy and for that purpose the Bank may close the Subsidised Advance Loan Account and open a new account in the name of the Borrower."
Apart from the application of section 45A, cancellation of subsidy is the most severe measure available under the Subsidy Scheme. Any decision to cancel subsidy must not be made lightly.
Delegates must remember that cancelling subsidy is a discretionary provision within the legislation, and any decision to cancel should be made with full knowledge of all the facts.
Generally, the policy is to cancel subsidy in all cases where any of the circumstances specified in the legislation apply, except where such circumstances can be corrected without the need to cancel.
Subsidy can only be cancelled if it is being paid on behalf of a borrower at the time the notice of cancellation is issued.
6.2.2.1 Deceased Estates. Subsection 27A(1) provides for the cancellation of subsidy where the eligible person has died and there is no surviving spouse or de facto partner. Cancellation may occur after three months have elapsed from the date of death of the last surviving member of a couple. Subparagraph 27A(1)(d) further provides that cancellation may occur where the Secretary considers it appropriate to do so. As a matter of policy, cancellation of subsidy in deceased estate cases where there is no surviving spouse or de facto partner is to occur in every case unless there are special circumstances which would warrant the continuation of subsidy. 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. The dependants might be minors or handicapped adult children, and it would be inappropriate to subject them to the additional costs inherent in discharging the existing mortgage and/or borrowing at commercial rates of interest.
6.2.2.2 Failure to Substitute Security. Sub-clause 11.15(a)(vii) of the Agreement provides for the termination/suspension and/or recovery of subsidy where a borrower is discovered to have sold a 'holding' or 'retirement village accommodation' to which subsidy relates and has not acquired another 'holding' or 'retirement village accommodation' as a substituted security within six months in accordance with Sub-clause 11.2A of the Agreement.
Certain situations may arise due to a misunderstanding of the provisions of the legislation by either the Bank or the borrower. In these cases the Bank and/or the borrower must be given every opportunity to remedy the situation before a decision to cancel subsidy is made.
It is general policy to give both the Bank and the borrower at least one month's notice of the intention to cancel subsidy (longer for deceased estates having regard to GO 6.2.2.1), regardless of the circumstances surrounding cancellation, even though this is not specified in the legislation. This is because:
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