Bills Digest no. 129 2005–06
Defence Housing Authority Amendment Bill
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Contact Officer & Copyright Details
Housing Authority Amendment Bill 2006
Date introduced: 30 March 2006
House: House of
Commencement: The Bill s formal provisions commence on Royal
Assent. The substantive provisions commence on proclamation or, at
the latest, six months after the Act receives Royal Assent.
To amend the Defence Housing Act 1987 in order to
provide an administrative and financial framework in which the
Defence Housing Authority can operate more commercially as a
government business enterprise.
The Defence Housing Authority (DHA) was established in 1988 to
provide housing for members of the Australian Defence Force (ADF)
and their families, in accordance with the operational requirements
of the Department of Defence. It is a statutory corporation in the
Defence portfolio. The Defence Housing Authority Act 1987
(the Act) requires DHA to perform its functions in a manner that
accords with Commonwealth policies and sound commercial
DHA reports to two ministers, the Minister for Defence, through
the Parliamentary Secretary for Defence, and the Minister for
Finance and Administration, who has delegated the responsibility to
the Special Minister of State.(2) In 1992 DHA became a
government business enterprise (GBE) subject to the
Commonwealth Authorities and Companies Act 1997 (CAC Act).
It currently has a Standard and Poor s credit rating of
AA+.(3) The Government has commented positively on DHA
and has placed great importance on the provision of quality housing
for Defence members and their families.(4) DHA surveys
of ADF tenants indicate a high degree of customer satisfaction with
their housing and relocation services.(5)
Since 1 July 2000, DHA has provided houses under a formal
services agreement with Defence.(6) Currently DHA
provides around 17,000 properties to Defence, valued at over $6
billion.(7) Of these, approximately 2,000 are located on
Defence bases and the remainder in the community. The Sale and
Leaseback Program is an integral part of DHA s business. Properties
are bought or constructed by DHA and in turn sold to investors with
whom a leaseback arrangement has been agreed for a period of three,
six, nine or twelve years. Around 60 percent of properties are
owned by private investors and leased back to DHA.(8) In
the next three years, DHA will spend approximately $1.5 billion on
building and acquiring new houses.(9)
During 2000 and 2001, DHA began providing Defence with
housing-related services, which were formalised in a second service
agreement in 2002. These are mainly: housing allocation and
relocation services; arranging for Defence to make payment of Rent
Assistance to members to use private houses; payment of relocation
and temporary accommodation allowances (on a reimbursement basis);
and arrangement of end-of-tenancy cleaning of service
Under the Act, the DHA board has 12 members. Four of these are
members of the ADF, one is a civilian official in Defence and
another is a Defence spouse representative. Another four board
members are drawn from the private sector for their commercial
expertise.(11) One of the purposes of this Bill is to
reduce the size of the DHA board to nine, and to establish an
advisory committee. Three of the four board members drawn from the
ADF, plus the representative of Defence spouses, will no longer be
members of the board but will instead comprise the DHA advisory
committee. This committee will then become the principal means by
which Defence and Defence families will make representations to
DHA employs about 750 staff in over thirty offices around
Australia. The staff are based at Housing Management Offices and
outposted offices located near major military facilities, as well
as in the national office and support centre in Canberra.
The Government flagged its intention to examine statutory
authorities and office holders in its 2001 election
platform.(13) On 14 November 2002, the Prime Minister,
Hon. John Howard, appointed Mr John Uhrig AC, a well-known and
respected businessman,(14) to review the governance
practices of statutory authorities and office holders, particularly
those agencies that impact on the business community. The objective
of the review was to identify issues concerning existing governance
arrangements, and to provide policy options for Government to gain
the best from statutory authorities and office holders and their
As part of the review process, Uhrig found there was no
universally agreed definition of corporate governance . His report
provides the following definition: in general terms, corporate
governance encompasses the arrangements by which the powers of
those who implement the strategy and the direction of an
organisation are delegated and limited to ensure the organisation s
success, taking into account the environment in which the
organisation is operating.(16)
The Prime Minister was provided with the
Review of the Corporate Governance of Statutory Authorities and
Office Holders in June 2003.(17) It was released by
the Minister for Finance and Administration on 12 August 2004. The
Report recommends that two templates be applied to ensure good
governance of statutory authorities: agencies should either be
managed by a Chief Executive Officer (CEO) or by a board structure.
Both templates detail measures for ensuring the boundaries of
responsibilities are better understood and the relationships
between Australian government authorities, Ministers and portfolio
departments are made clear.(18)
Uhrig recommended that the selection of the management template
and financial frameworks to be applied should be based on the
governance characteristics of a statutory authority.(19)
The principal consideration in deciding which template is
appropriate for a given function is whether the Government is
willing or able to delegate full power to act .(20) The
first is the board template: here the government
will have determined that it is appropriate for a board to have
such power, including power to appoint and remove the CEO, to
determine directions, approve policies and corporate plans, and
oversee management. It is likely that this template will apply
where the function is primarily that of undertaking commercial
operations, or where there are multiple accountabilities because
the Commonwealth does not own the full equity. The CAC Act will
apply to these statutory authorities that are legally and
financially separate from the Commonwealth.
The second is the executive management
template: here the Government will have determined that a
full delegation of power is not appropriate. This condition is
likely to apply to statutory authorities undertaking regulatory and
service provision operations, where an executive management group
is governed directly by the Minister with departmental support and
advice .(21) The Financial Management and
Accountability Act 1997 (FMA Act) should be applied to
statutory authorities where it is appropriate that they be legally
and financially part of the Commonwealth and do not need to own
assets. This includes Budget-funded authorities. Uhrig recommended
that these organisations should be governed by a CEO.
The Minister for Finance, Senator Minchin, said that ministers
would assess all statutory authorities and similar bodies within
their portfolios against the review s templates .(22) In
January 2006 he reported that more than 160 government bodies were
being assessed, and that the governance principles had informed the
most recent policy guidance on designing Australian government
bodies. The Uhrig process is proving very useful in improving and
streamlining how government governs itself , he said in a media
In addition to the recommendations intended for the Government
in dealing with statutory authorities, the Uhrig Report also
includes a set of guidance principles for getting the best from
boards of statutory authorities. Because this Bill makes changes to
the DHA along the lines recommended by the Uhrig Report, these
guidelines are relevant to the legislation. The Uhrig guidelines
- Board size should be developed taking into consideration
factors such as an entity s size, complexity, risk of operations
and the needs of the board.
- Committees are a useful mechanism for the board to enhance its
effectiveness through further detailed oversight and supervision of
the management of risks that are critical to the success of the
entity. Committees should only be used for this purpose.
- In getting the best from boards, appropriately experienced
directors are critical to good governance.
- Representational appointments to boards have the potential to
place the success of the entity at risk.
- Responsible Ministers should issue appointment letters
detailing government expectations of directors.
- Maximum board service periods allow for a structured rotation
- All boards should have orientation programs and directors
should have the opportunity for ongoing professional
- Annual assessments of the board need to occur to ensure
government gets the best from the board.(24)
This Bill reduces the size of the DHA board from 12 to 9
members, changes the composition of the board to make it more
commercially focused ,(25) and alters the way in which
board members are selected. The new board of DHA will comprise:
- a Chairperson nominated by the Secretary of Defence
- a current or former employee of the Australian Public Service
(APS) or Agency Head with a background in Defence, nominated by the
Secretary of Defence
- a current or former member of the ADF, nominated by the Chief
of the Defence Force
- a person nominated by the Secretary of the Department of
Finance and Administration
- a Managing Director chosen by the DHA board
- four commercial members chosen because of their expertise in a
range of fields including housing operations, real estate, property
development or management, business and finance, building or
construction management, or social planning.
The qualifications of the commercial members are not changed by
this Bill but the inclusion of a nominee of the Secretary of the
Department of Finance and Administration is new. The removal of the
Defence spouse representative and three of the four ADF members is
in keeping with Uhrig s better-practice guideline 4 that
representational appointments to boards have the potential to place
the success of the entity at risk .(26) The requirement
that appointments to the board be made by the Governor-General is
removed. In future, appointments will be made by the Minister for
Defence, except in the case of the member who is nominated by the
Secretary of the Department of Finance and Administration, who will
be appointed by the Finance Minister. All appointments are to be by
written instrument (Uhrig s guideline 5) for a renewable term of
three years (guideline 6).
The six-member advisory committee is to consist of the National
Convenor of Defence Families of Australia(27) and
representatives from the Army, Navy, Air Force and DHA. The
Chairperson of the advisory committee is to be the DHA board member
who is nominated by either the Secretary of Defence, or the Chief
of the Defence Force. According to the Explanatory Memorandum,
[t]he decision as to who will chair the committee is to be made by
the DHA board to ensure that the DHA board can distribute committee
workloads appropriately and evenly .(28) The role of the
advisory committee is to give advice and information to DHA about
the performance of DHA s functions. The committee may do this
either on its own initiative or at the request of DHA. The
Explanatory Memorandum states that the board is to be provided with
the power to give written instructions to the advisory committee
about how to carry out its functions and meeting
procedures.(29) This provision does not actually appear
in the legislation. Members of the advisory committee are to hold
office for three years on a part-time basis, and the National
Convenor of Defence Families of Australia is to be paid a
remuneration determined by the Remuneration
Tribunal.(30) Members may be re-appointed at the end of
The Bill expands the range of services that DHA can provide to
Defence and enables it to broaden its operations to include the
provision of services to other Commonwealth agencies. DHA s primary
function is to provide housing and housing-related services to
members of the ADF and their families, to meet the operational
requirements of Defence. This Bill will broaden DHA s powers to
allow it to provide ancillary services which may include the
provision of access to services provided by other service
providers, such as recreational, educational and financial service
providers. The Explanatory Memorandum states that the intention is
not to limit the potential ancillary services by defining them
precisely .(31) However, there must be a connection
between any proposed ancillary service and housing or
The second additional function provided by this Bill will allow
DHA to provide housing and housing-related services to officers and
employees of other Commonwealth agencies, or to persons contracted
to provide goods or services to officers and employees of other
Commonwealth agencies and their families, in order to meet the
operational needs of that agency. A Commonwealth agency is defined
using the definition of agency under the FMA Act. A media release
dated 4 April 2006 suggests that DHA is already providing housing
and relocation services to members of the Australian Customs
The Minister s approval is required for the exercise of both the
additional functions. The Minister may determine, in general terms,
who the services can be provided to, the kind of services that can
be provided and any other matter. The Minister does not have to
approve each individual contractual arrangement provided that it is
within the scope of the determination.
A limit will be placed on the extent to which DHA can undertake
these new functions. In order to protect the interests of Defence
and to ensure that DHA maintains its primary focus, it will be able
to earn no more than 25 percent of its total gross revenue from
performing the additional functions. The limit may be varied to
less than 25 percent by regulation. The Explanatory Memorandum says
that there will be an administrative review of the 25 percent limit
after the amendments have been in place for three
The Bill repeals at least nine sections that deal with the
manner in which DHA can perform its functions and its financial and
reporting obligations. In future DHA will be subject to the
provisions of the CAC Act. The Explanatory Memorandum notes that
the proposed changes will give the DHA board more freedom to
determine its directions, strategies and to manage its
risks(34) while the obligations placed on Commonwealth
Authorities by the CAC Act, including reporting and accountability,
banking and investment, and the conduct of officers, are consistent
with the obligations placed on other government business
enterprises . (35)
The Bill makes DHA liable for Commonwealth taxation in future.
In addition, although DHA will retain its exemption from state and
territory taxation, it will be required to make tax-equivalent
payments to the Commonwealth. The rationale for these new
arrangements, according to the Explanatory Memorandum, is to ensure
that DHA does not receive a competitive advantage by virtue of its
exemption from State and Territory taxation .(36) The
effect of these changes may be to increase the costs of DHA, while
putting it on a more commercial basis. No figures are provided by
the Government as to the extent of DHA s potential taxation
According to the Explanatory Memorandum. this Bill will have no
financial implications for the Commonwealth.(37)
Items 1 and 2 of
Schedule 1 change the name of the Defence Housing
Authority to Defence Housing Australia . The acronym DHA will
continue to be used as a brand name.
Items 14 to 21 deal with the
functions of DHA. Item 14 inserts the word main
before the word function in both the heading and in subsection
5(1). The effect of this change is to reinforce that DHA s primary
responsibility remains the provision of housing to Defence. It also
indicates that DHA has other responsibilities. Items
16 and 20 add housing-related services to
DHA s main function. The provision of housing-related services (for
example, rent assistance payments to members of the ADF) does not
depend on eligible people receiving housing from DHA. This would
allow ADF personnel to rent accommodation from suppliers other than
DHA and still receive rental assistance payments through DHA.
Item 18 clarifies to whom DHA can provide
housing and housing-related services. The changes proposed by
item 18 allow DHA to provide housing to Defence
contractors and the contractors families. This would enable Defence
to engage a contractor and, as part of the contractual arrangement,
agree to supply the contractor s housing.
Item 22 repeals the existing section which
spells out the way in which DHA must perform its function, namely
in a manner that accords with Commonwealth policies and sound
commercial practice . According to the Explanatory Memorandum, this
requirement will in future be covered by section 28 of the CAC
Item 22 also inserts a new section
6 that will enable DHA to provide housing and
housing-related services to officers and employees of other
Commonwealth agencies, or to people contracted to provide goods or
services to officers and employees of other Commonwealth agencies
and their families, in order to meet the operational needs of that
agency (new subsection 6(1)). In addition,
new subsection 6(2) allows DHA to provide services
that are ancillary to housing and housing-related services to
Defence and other Commonwealth agencies in order to meet their
operational needs. The Minister s approval is required before DHA
can provide the additional services (new subsection
6(4)). A limit of up to 25 percent of DHA s total gross
revenue is placed on the amount of revenue that DHA may make from
additional services in any one financial year (new
subsections 6(6) to 6(8)).
At present DHA must seek written ministerial approval before
entering into a contract requiring the payment by it of an amount
exceeding $6 million. Item 26 retains this limit
but adds, by item 27, a provision allowing the
Minister to vary the limit in line with changes in Government
policy or changes in the economic and commercial operating
Item 37 inserts a new Part III
dealing with the Board. The Board of Directors of DHA is to consist
of nine members. Eight members, including the Chairperson, are to
be appointed by the Minister for Defence, and one member by the
Minister for Finance and Administration (new subsection
14(1)). The board is to comprise four commercial members,
the Chairman and the Managing Director, two members with a Defence
background, and one member nominated by the Secretary of the
Department of Finance (new paragraphs 12(1)(b) to
Item 69 inserts a new Part
IIIA establishing an advisory committee of six members.
Under new section 27 the advisory committee will
consist of the National Convenor of Defence Families Australia,
together with representatives of the Royal Australian Navy, the
Australian Army, the Royal Australian Air Force and DHA. The
advisory committee is to be chaired by one of the two board members
with a background in Defence. New section 28
provides that the function of the advisory committee is to give
advice and information to DHA about the performance of DHA s
functions, either on its own initiative or at the request of DHA.
The legislation does not appear to restrict the advisory committee
to passing its advice and information only through the board. The
Explanatory Memorandum refers to new section 30
which is apparently intended to give the board power to provide
written instructions to the advisory committee about how it is to
operate. However, item 75 repeals section 30 and
does not substitute any further provision. There is no new section
30 in the Bill.
Two main changes are introduced. Item 115
inserts new section 62A making DHA liable for
Commonwealth taxation. DHA retains its exemption from state and
territory taxation, but must make tax-equivalent payments as
directed by the Minister (new section 63A). The
Minister s written notification of the tax-equivalent payments may
cover more than one financial year.
In 2002 03, the Australian National Audit Office (ANAO)
conducted a performance audit of Defence housing and relocation
services.(38) The purpose of the audit was to assess
whether Defence s management of its housing and relocation services
for ADF members met specified requirements, and to make practical
recommendations for more efficient, effective and economical use of
public resources provided for this purpose. It was not an audit of
DHA s performance in providing housing and relocation services to
Defence, in part because section 16 of the Auditor-General Act
1997 states that the ANAO may conduct a performance audit of a
government business enterprise such as DHA, only if the responsible
Minister, the Finance Minister or the Joint Committee of Public
Accounts and Audit requests the audit.
One of the findings of the audit was that the standard of
housing provided by DHA to Defence exceeds Defence s specified
requirement .(39) This may be explained by Defence s aim
to maintain a high rate of satisfaction among ADF members and their
families with their housing arrangements because this assists
retention of valuable Defence personnel. According to the ANAO
audit report, Defence has largely accepted this outcome, despite
the cost implications .(40) The audit report recommended
that in future, Defence needed to manage its housing arrangements
strategically and ensure that the services that it received from
DHA both met its housing requirements and provided value for money.
The changes proposed by this Bill, in particular the restructuring
of the board of DHA and the changes to its taxation regime, may
have further implications for Defence.
Attention is drawn to a possible technical flaw in the proposed
legislation. Item 75 repeals section 30. The Explanatory Memorandum
refers to a new section 30 but this provision is not included in
- Defence Housing Authority Act 1987, sections 5 and
- Defence Housing Authority, Annual Report 2004 05,
Canberra, 2005, p. 7.
- ibid., p. 25.
- The Federal Government has placed great importance on the
provision of quality housing for Defence members and their
families. DHA plays a pivotal role in providing housing and housing
services to these people . Hon. Ian MacFarlane, Minister for
Industry, Tourism and Resources, The Voice, 22 February
Providing high quality accommodation is essential if we are to
keep valued members of the Australian Defence Force . Hon. Danna
Vale, Minister Assisting the Minister for Defence, Media
Release, 2 April 2003.
- Defence Housing Authority, Annual Report 2004 05, pp.
- Defence comprises the Department of Defence and the Australian
Defence Force (ADF). The ADF comprises the three Services (Army,
Navy and Air Force) and has some 51,500 full-time members.
- Defence Housing Authority, Annual Report 2004 05, p.
- Defence housing and relocation services: Department of
Defence, Australian National Audit Office,2003,p.11
- The other two board members, making a total of 12, are the
Chairperson and the Managing Director.
- Hon Bruce Billson, Second Reading Speech: Defence Housing
Authority Amendment Bill 2006 , House of Representatives,
Debates, 30 March 2006, p. 8.
- R. Grant, The Uhrig Review and the future of statutory
authorities , Research Note, no. 50,
Parliamentary Library, Canberra, 2004 05, p. 2.
- At the time of his appointment to undertake the inquiry, Mr
Uhrig was chairman of Santos Ltd and a former chairman of Rio
Tinto, Westpac and the Australian Manufacturing Council. Within the
public sector, he had served as member of the original National
Companies and Securities Commission, the Export Finance and
Insurance Corporation, and the South Australian Remuneration
Tribunal. (R. Wettenhall, Statutory authorities, the Uhrig Report
and the trouble with internal inquiries , Public Administration
Today, Dec Feb. 2004 2005, p. 62.
- J. Uhrig, Review of the corporate governance of statutory
authorities and office holders, June 2003, Commonwealth of
- ibid., p. 17.
- Senator the Hon N. Minchin, Minister for Finance, Australian
Government response to Uhrig Report , Media Release, 12
- J. Uhrig, op. cit., p. 12, point 6.
- ibid., p. 79.
- ibid., p. 85.
- Senator the Hon. N. Minchin, op. cit.
- Senator the Hon. N. Minchin, Uhrig Review: progress with
implementation , Media Release, 5 January 2006; also
Department of Finance and Administration, Governance
implementation update (Uhrig Review): how is the assessment process
progressing?, February 2006.
- J. Uhrig, op. cit., pp. 12 13.
- Explanatory Memorandum, item 39.
- J. Uhrig, op. cit., p. 13.
- Defence Families of Australia (DFA) was formed in 1986 to
represent the views of Defence families. According to their website
[t]he aim of DFA is to improve the quality of life for Defence
families by providing a recognised forum for their views and by
reporting, making representations and influencing policy that
directly affects families . Throughout this Bill, DFA is referred
to as Defence Families Australia .
- Explanatory Memorandum, item 69.
- ibid., item 69, referring to new section 30 .
- At present the National Convenor of Defence Families of
Australia carries out her role on a voluntary basis.
- Explanatory Memorandum, item 22.
- Hon. Gary Nairn, Special Minister of State, $100m investment in
Defence Housing Authority portfolio , Media Release, 4
- Explanatory Memorandum, item 22.
- Explanatory Memorandum, item 40.
- ibid., items 28, 29 and 30.
- ibid., item 119.
- ibid., [p. 2].
- Defence housing and relocation services: Department of
Defence, op. cit.
- ibid., p. 15.
19 May 2006
Bills Digest Service
Information and Research Services
This paper has been prepared to support the work of the
Australian Parliament using information available at the time of
production. The views expressed do not reflect an official position
of the Information and Research Service, nor do they constitute
professional legal opinion.
IRS staff are available to discuss the paper's
contents with Senators and Members and their staff but not with
members of the public.
© Commonwealth of Australia 2006
Except to the extent of the uses permitted under the
Copyright Act 1968, no part of this publication may be
reproduced or transmitted in any form or by any means, including
information storage and retrieval systems, without the prior
written consent of the Parliamentary Library, other than by members
of the Australian Parliament in the course of their official
Published by the Parliamentary Library, 2006.
Back to top