Bills Digest no. 125 2008–09
Defence Legislation Amendment Bill (No.1)
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
introduced: 18 March
House: House of Representatives
Portfolio: Defence Science and
Sections 1 3 on the day of
Royal Assent; Schedule 2 on the 28th day after Royal Assent and;
Schedule 1 on the 28th day after Royal Assent or 1 July 2009,
whichever is the earlier.
relevant links to the Bill, Explanatory Memorandum and second
reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
The purpose of the Bill is
- to amend the Defence Act 1903 (the Defence Act) to
introduce a Tactical Payment Scheme (TPS) which would enable
expeditious no-liability payments to be made to eligible persons
adversely affected by Australian Defence Force Operations outside
of Australia, and
- to amend the Defence Home Ownership Assistance Scheme Act
2008 (DHOAS Act) to remove a number of unintended operational
outcomes which are inconsistent with the original policy
Background Tactical Payment
In order to protect civilians from harm, the
laws of armed conflict distinguish between combatants and
civilians. The principle of distinction is expressed foremost in
the absolute prohibition on intentional targeting of civilians
expressed in the first Protocol Additional to the Geneva
Conventions (Additional Protocol I).
[Nevertheless], civilians are not entirely
immune to attack, and not every injury to a civilian constitutes a
violation of international law. Instead, beyond the absolute
prohibition on intentional targeting of civilians the parties
conduct is governed by the obligation to minimise harm to
civilians, without setting undue limitations on the pursuit of
Article 57 of Additional Protocol I, provides that, amongst
other things, a party must not carry out an attack which may be
expected to cause incidental civilian loss that would be excessive
in relation to the direct military advantage anticipated.
Article 58 of Additional Protocol I requires the targeted party
to endeavour, to the maximum extent feasible, to remove the
civilian population, individual civilians and civilian objects
under their control from the vicinity of military
Together, Articles 57 and 58 lay down a due diligence standard
by which international legal responsibility for civilian loss and
damage only arises from a failure to comply with the obligations to
take reasonable precaution to minimise harm to civilians.
When the attacking party complies with the
precautionary requirements the causation of injury to civilians is
regarded as unavoidable . The attack is not a breach of
international law and the attacking party does not bear
international responsibility for the resulting injury.
Whilst Additional Protocol I doesn t quite have the essentially
universal membership that the 1949 Geneva Conventions do, some 168
countries have ratified Additional Protocol I, including
The United States is not a signatory to Additional Protocol 1.
Nevertheless, it has in place a number of mechanisms for paying
civilian compensation. The details of the US payments scheme are
outlined below. They provide some of the basis for the proposed
According to the United States Government Accountability
There are a number of ways that the U.S.
government provides assistance to Iraqi or Afghan civilians who are
killed, injured, or suffer property damage as a result of U.S. and
coalition forces actions.
the Department of Defense (DOD) administers a
program that provides compensation under the Foreign Claims Act to
inhabitants of foreign countries for death, injury, or property
damage caused by non-combat activities of U.S. military personnel
overseas. Further, DOD provides monetary assistance in the form of
solatia and condolence payments to Iraqi and Afghan nationals who
are killed, injured, or incur property damage as a result of U.S.
or coalition forces actions during combat [under the Commander s
Emergency Response Program (CERP)].
A condolence payment is an expression
of sympathy for death, injury, or property damage caused by
coalition or US forces generally during combat. In addition, at
commander discretion, payments may be made to Iraqi civilians who
are harmed by enemy action when working with US forces. Payment is
not an admission of legal liability or fault.
A solatia payment is a token or
nominal payment for death, injury, or property damage caused by
coalition or US forces during combat. Payment is made in accordance
with local custom as an expression of remorse or sympathy toward a
victim or his/her family. Payment is not an admission of legal
liability or fault.
The amount of condolence payments is limited to up to US$2500 for each
instance of death, injury, or property damage. Importantly, it has
been reported that whilst a maximum of US$2500 (A$3347) is paid to
relatives of someone killed by coalition forces, less is paid if
the dead person is a man of military age.
The amount of solatia payments is limited as follows:
- in Iraq up to US$2500 for death, up to US$1500 for serious
injury and US$200 or more for minor injury.
- in Afghanistan up to 100 000 Afghani (US$2336+/-) for death, 20
000 Afghani (US$467+/-) for serious injury and 10 000 Afghani
(US$236+/-) for non-serious injury or property damage.
From fiscal years 2003 to 2006, DOD reported about US$1.9
million in solatia payments and more than US$29 million in
condolence payments to Iraqi and Afghan civilians who were killed,
injured, or incur property damage as a result of US or coalition
forces actions during combat.
Tracy explains the problems which have arisen for US Forces in
regard to these payments as follows:
The new U.S. Army Field Manual on
Counterinsurgency greatly stresses the importance of winning
civilians hearts and minds. To win hearts and minds, militaries
must take a holistic approach to rebuilding a nation after war by
providing infrastructure, governance, safety and well-being.
Failure in these components may prevent lasting victory.
positive treatment of civilians becomes
imperative to strategic military interests. While building a school
or hospital may help the military win over a community, providing
individual monetary assistance to a family who lost a breadwinner
during a firefight can win over a family and a neighborhood.
[However] instead of creating an equitable law,
in every major conflict since Vietnam, the United States has
implemented ad hoc nominal payment programs. Iraq is no
For several reasons the program is inequitable
and inadequately meets the moral and practical goals of a combat
First, payments for every death, injury, or
property damage incident are limited to $2,500. Brigadier generals
or higher can now authorize payments of up to $10,000; however,
there is little to no evidence of any individual payments exceeding
$2,500 per death. Placing a price on personal tragedy is always
difficult, but it is possible to provide payments respectfully and
in line with regional customs officers may pay full market value
when a tank runs over an Iraqi s truck in the course of a
non-combat related accident, but may only pay $2,500 for the death
of a civilian killed in a firefight This artificial limit leaves
survivors bitter and frustrated.
Second, reconstruction projects overshadow
condolence payments. Commanders prioritize CERP funds for
reconstruction projects at hospitals, schools, or power stations,
at the expense of condolence payments. In fiscal year 2005
condolence payments accounted for eight percent of all CERP
Third, the rules governing condolence payments
are ad hoc. Each unit takes different approaches to if, when, and
how to make condolence payments. Some units choose to pay only high
profile cases. Others will not pay claims when a different unit
caused the harm no matter how difficult or impossible it will be
for an Iraqi to file with the appropriate unit.
A final problem resulting from the program s ad
hoc nature is that no adequate claims officers guidelines exist.
Different victims receive disparate treatment because officers lack
substantive guidance regarding standard of proof, rules of
evidence, how to determine valuation, or sensitivity training The
nature of this system leads to drastically different results for
civilians who suffer the same harm. These conflicting outcomes
intensify negativity and nullify any potential goodwill won by
offering condolence payments.
At present, Australia does not have a formal scheme of payments
which is similar to the condolence or solatia payments made by the
US. Instead, some ad hoc payments have been made in respect of
civilian loss and damage by way of an act of grace payment.
In August 2005 it was reported that the Australian Defence Force
(ADF) had worked with US and British armed forces to establish
compensation rates to be paid to civilian victims in the war zone,
believed to include those caught in crossfire or mistakenly shot at
Air Chief Marshal Angus Houston, the Chief of Defence Force, was
specifically questioned about payments of compensation made to two
Iraqi families by the Senate Estimates Committee on Foreign
Affairs, Defence and Trade Legislation on 2 November 2005. He made
the following comments:
First of all, I would say that it is not
If we have a driving accident in Iraq and we
injure somebody we pay compensation. But if an Iraqi citizen is
injured during the course of military operations, in those
circumstances we will look at the circumstances and do a full
investigation. If we determine that the Iraqi has been injured or
indeed has suffered property damage as a consequence of the
military action or military circumstances that occurred, our people
in Baghdad will put forward a submission suggesting that an
act of grace payment be made to the individual for
the injuries they sustained or the damage to property that
occurred. The process runs from Baghdad through the operational
chain of command. It comes through to the Vice Chief of the Defence
Force, who then puts that submission up to the minister and, if the
minister believes that the circumstances warrant an act of grace
payment, we then move across to Finance who have the delegation for
Section 33 of the Financial Management and Accountability
Act 1997 (FMA Act) provides the legislative basis for an act
of grace payment where the Finance Minister considers it
appropriate to do so because of special circumstances.
The Department of Financial and Deregulation has issued a
the making of act of grace payments which includes, but is not
limited to, the following information about the payments:
- they may be appropriate in relation to losses that have
occurred as a direct result of the involvement of an agency of the
Australian Government (such as the ADF), where that involvement had
an unintended outcome
- conditions may be attached
- they are made where the paramount obligation to the claimant is
moral, rather than legal
- they can cover economic and non-economic losses sustained.
In addition, the circular sets out those circumstances in which
the making of an act of grace payment is not appropriate.
Although act of grace payments must be authorised by the Finance
Minister or a delegate, payments are funded and reported under an
appropriation and outcome of the agency to which the act of grace
case relates. The number and quantum of payments must be included
in the notes to the agency s financial statements each
However the quantum of payments to date is not clear. For
example, Senator the Hon. John Faulkner, in hearings by the Senate
Estimates Committee on Foreign Affairs, Defence and Trade
Legislation on 2 November 2005 stated:
I believe the corrected figure of the act of
grace payments is $A10,540 I know, firstly, that the total amount
of $A10,540 is the corrected evidence and, secondly, that there are
two such act of grace payments.
The notes to and forming part of the financial statements for
the Department of Defence for the financial year 2007 08 indicate
that three act of grace payments were made during that period
amounting to a total of $81 483. The amount for the previous
financial year was $199 559 when 14 such payments were
this is the total of act of grace payments in the relevant
financial year and it is not clear whether each of those payments
relate to an activity of the Defence Force outside Australia as is
contemplated by proposed subsection 123H(1) of the Bill.
The criticism of the current system for making payments relates
to the alleged secrecy relating to the circumstances which give
rise to the payments and the details of the amounts paid. In April
2007 it was reported that:
In total $266,681 of taxpayers money has been
paid out to Iraqi civilians in so-called act of grace payments
since the Australian Defence Force began operations in Iraq.
The payments are huge sums for Iraqis, with the
US Agency for International Development putting the present Iraq
average annual income at $1,830
While brief details are provided for some of
the awards, the single biggest amount of $89,100 paid out last year
has not been explained.
The Hon. Warren Snowdon, Minister for Defence Science and
Personnel stated that:
in many areas in which the ADF operates, the
expectation of financial compensation for collateral damage to
property, injury or loss of life is often a common aspect of local
experience in East Timor, Iraq and Afghanistan
has shown that the administrative requirements involved in making
an act of grace claim make that system unsuitable for use in
Even small delays in making payments can have a
negative impact on relations with the local community and therefore
on the security and protection of ADF personnel deployed
The TPS is intended to operate independently from the act of
grace payments provisions and be managed and operated by
A number of matters should be borne in mind in considering the
effectiveness of the proposed TPS. Firstly, it
will be important to maintain some level of consistency in deciding
when payments should be made. Whilst individual decisions are
intended to be made in the context of local cultures which will be
different in each sphere of operation, it would helpful if decision
makers were able to draw up upon appropriate guidelines in
implementing the TPS.
Secondly, whilst there is provision in the Bill
to set a maximum payment under the TPS of $250 000, there is no
provision to make regulations which could be used, for instance, to
set a sliding scale of payments for specified injuries or damage.
Specifically the Bill does not propose to amend the regulation
making power in section 124 of the Defence Act to include the
Thirdly, the Bill seeks to provide a mechanism
for a payment which is an appropriate and immediate response to a
civilian who has suffered personal or property damage in an area
where the ADF is operating. The Bill provides that the making of a
payment is not limited by section 33 of the FMA Act and will act
independently from the act of grace payments provisions . This brings about two
- it is likely that TPS payments will not be subject to the same
rigid examination and investigation as occurs before an act of
grace payment is made, and
- the distinction between the payment schemes is not clear that
is, whilst TPS payments will only be available to persons who have
suffered loss, damage or injury outside Australia
there is nothing in the proposed legislation which indicates that
those persons might be eligible for an act of grace payment as an
Finally, currently the number and total amount
of act of grace payments made in a financial year must be reported
in the notes of the Department of Defence annual report. The Bill
is silent about the reporting and transparency of TPS payments.
Given the allegations that the circumstances surrounding the making
of act of grace payments have been secretive, accountability for
the payments should be specified.
The Defence Home Ownership Assistance Scheme commenced on 1 July 2008 in
accordance with the Defence Home Ownership Assistance Act
2008. The relevant Bills
Digest provides useful background to the Scheme.
According to the second reading speech, the Scheme
Administrator, the Department of Veterans Affairs has highlighted a
number of unintended outcomes inconsistent with the initial policy
intent . The
Bill addresses those unintended outcomes.
The relevant report by the Department of Veterans Affairs has
not been published.
At its meeting of 19 March 2009, the
Selection of Bills Committee resolved that the Bill not be referred
According to the Explanatory Memorandum, the amendments in the
Bill will have no additional impact on Commonwealth expenditure or
However it is not clear:
- whether the ADF will make a higher number of payments under the
- whether the quantum of those payments will be greater than
under the current act of grace arrangements and
- what financial impact, if any, this will have.
The Bill contains two schedules.
Item 1 of Schedule 1 amends the Defence Act by
inserting proposed sections 123H and 123J.
Proposed subsection 123H(1) provides that the
authorise the making of one or more payments to a person who has
suffered loss, damage or injury outside Australia because of an
incident that occurs in the course of an activity of the ADF
outside Australia in the following circumstances:
- person is not an Australian citizen and
- the payment is not otherwise authorised by law or required to
meet any legal liability.
Three matters arise from this proposed subsection.
Firstly, the nature and extent of the loss that
has been suffered is not defined in the Bill. It may be that this
term is intended to encompass the loss of a
next-of-kin who has been killed in the course of the relevant ADF
activity. However, it should be noted that, unlike the US scheme,
proposed subsection 123H(1) does not make specific
provision for a payment to a next-of-kin, in the event of a
Secondly, the loss, damage or injury does not
have to specifically be caused by the ADF, merely
to have occurred in the course of an activity of the ADF outside
Australia. That being the case, the proposed subsection has a broad
application. It could potentially include loss, damage or
- caused by non-ADF personnel (including enemy forces) or
- where the exact circumstances of the loss, damage or injury
cannot be determined
as long as it is sufficiently connected to the incident.
Thirdly, the proposed subsection refers to an
activity of the ADF. According to the Explanatory
Memorandum an activity may include military action, operation,
exercise or training undertaken during an overseas operation
. However the
term, activity is not defined in the Bill or in the principle act.
This makes the proposed TPS much broader than the US scheme because
condolence payments and solatia payments are only triggered by
death, injury, or property damage caused by coalition or US forces
generally during combat.
The payment cannot be made to the person more than 12 months
after the relevant incident: proposed subsection
123H(2). There is no requirement that investigations be
undertaken, and decisions made, within a specific time frame.
The total amount of the payments must not be more than the
amount set by regulation currently $250 000: proposed
Proposed subsection 123H(4) makes it clear that
the TPS operates independently of the act of grace payment
provisions of the FMA Act. It may be that the act of grace payment
provisions will apply to a person whose next-of-kin has been killed
in the course of the relevant ADF activity. See the comments in
respect of proposed subsection 123H(1) above.
Proposed section 123J allows the Minister to
delegate his or her powers under proposed section 123H to:
- the Secretary of the Department of Defence
- the Chief of the Defence Force
- an officer in command of an activity of the ADF outside
- an Australian Public Service employee who holds or performs the
duties of an APS 6 or higher position in the Department of
There are five parts to Schedule 2 of the Bill. All of the parts
amend the DHOAS Act.
Part 1 of Schedule 2 relates to rejoining
The first of the
unintended consequences which the Bill seeks to address is the
windfall gain in the eligibility and entitlement of members who
rejoined the ADF after a break in service prior to 1 July
Ownership Assistance (DHOA) is payable as either or both a monthly
subsidy or a subsidy lump sum. A person s eligibility for the
subsidy is based, in part, on their effective
service . Item 1 amends the existing
definition of effective service by
inserting proposed paragraph 3(a). The effect of
the amendment is to exclude any service performed before a break in
service of greater than five years for the purpose of calculating a
member s eligibility or entitlement.
Existing section 7 of the DHOAS Act lists the persons who are
eligible for the subsidy as:
- a serving member
- an incapacitated member
- a rejoining incapacitated member
- a rejoining member
- a separated member
- an old scheme member.
Item 2 inserts proposed subsection
8(3) which clarifies that where a member appears to be
eligible for DHOA under more than one of those categories, the
member is expressly eligible under the section that most closely
describes his or her circumstances.
Item 3 amends existing paragraphs 10(1)(b) and
11(c) by omitting the words on or after 1 July 2008 and
substituting before, on or after the commencing day . The effect of
this amendment is that those persons who would be classed as
rejoining incapacitated member or rejoining member are assessed
under those categories rather than under the category of serving
member as currently occurs.
Part 2 of Schedule 2 relates to subsidy certificates and
A subsidy certificate is issued to an applicant so that it may
be presented to a home loan provider as evidence of the member s
entitlement to payment of a subsidy. Under the current
a subsidy certificate could have been issued
even if the member had exhausted their service credit and could not
receive a subsidy payment. This undermined the reliability of
the certificate as evidence for home loan providers that a member
was able to receive a subsidy on the loan provided.
Item 5 addresses this perceived anomaly.
Item 5 amends existing subsection 16(2) which
provides that the Secretary must give a subsidy certificate to an
applicant if sections 17, 18, 19 or 20 apply. Proposed
paragraph 16(2)(b) is inserted to include the additional
requirement that the applicant must also have either:
- a service credit: proposed subparagraph
- in the case of a surviving partner, the service credit the
deceased partner would have had if he or she had not died:
proposed subparagraph 16(2)(b)(ii).
In addition, item 6 amends existing section 22
which provides for the period during which a subsidy certificate is
in force by inserting proposed subparagraph
22(b)(ia). The amendment provides that where a person who
holds a subsidy certificate is not a member of the ADF, the subsidy
certificate stops being in force as soon as the person no longer
has a service credit.
Item 7 is an applications provision which
operates so that the amendments in Part 2 of Schedule 2 of the Bill
do not have retrospective effect.
Part 3 of Schedule 2 relates to subsidy lump
Under the current arrangements, a member who
owns an investment property whilst serving in the ADF is able to
access the subsidy lump sum payment option to purchase a property
to occupy as a home. This is inconsistent with the original policy
intent of the lump sum payment to assist genuine first home
Item 8 repeals existing section 26 and inserts
proposed section 26 which clarifies that a lump
sum subsidy is only payable to a member of the ADF and is only
payable in relation to the first residential property bought while
a member of the ADF.
Items 9 and 10 amend existing section 34 which
details when the subsidy lump sum becomes payable. Item
9 repeals existing paragraph 34(1)(f) and inserts
proposed paragraphs 34(1)(f) and (g) which require
the Secretary to be satisfied before approving a lump sum payment
that there is a reasonable expectation that monthly subsidy will be
payable to the subsidised borrower
- for at least one month if the borrower is a member of the
Permanent Forces: proposed subparagraph
- for at the number of months remaining in the service year if
the borrower is a member of the Reserves: proposed
Proposed paragraph 34(1)(g) clarifies that the
subsidy lump sum will not become payable if there is previous home
Proposed subsection 34(2) relates to previous
home ownership. The proposed subsection prevents a person from
being paid the subsidy lump sum in circumstances where he or she
(either with a partner or as an individual) has previously
purchased residential property, regardless of whether he or she has
resided in that property.
Item 11 provides that the amendments in Part 3
of Schedule 2 of the Bill only apply to a request for payment of
subsidy lump sum which is made on or after the amendments
Part 4 of Schedule 2 relates to shared
Under existing paragraph 28(4)(c) a person may have their own
subsidised loan limit added to their partner s loan limit, allowing
them to jointly apply their loan limits on a single loan up to the
value of the loan.
Item 13 replaces the existing paragraph
28(4)(c). The proposed wording removes the reference to partners so
that it becomes possible for any two subsidised
borrowers to obtain subsidy on the same loan,
regardless of their relationship.
Items 14 and 15 insert the words to a
subsidised borrower in existing subsection 51(1) and paragraph
51(1)(a) in order to clarify that subsidy is payable to a
subsidised borrower in those
Items 16 repeals existing paragraph 51(1)(b)
and inserts proposed paragraph 51(1)(b) to specify
that the loan capital in respect of which subsidy is payable to a
subsidised borrower is linked to the provisions in subsection 51(2)
that is, to the borrowers length of service or eligibility.
Item 17 inserts a note which links the amount
of loan capital in respect of which subsidy is payable to
proposed sections 51A C.
Item 20 inserts proposed sections 51A
C which set out the rules for the treatment of loans for
which both a subsidised borrower and
another person are liable.
Proposed section 51A is about the monthly
subsidy payable where a subsidised
borrower and his or her partner are parties to a single
subsidised loan. Proposed subsection 51A(2) contains a table which
sets out the relevant loan capital rules so that:
- where both of the parties to the loan are
subsidised borrowers each partner is
taken to be liable for half the loan, and each is taken to have a
loan limit equal to the average of both their loan limits as sole
borrowers: proposed item 1
- where only one of the parties to the loan is a
subsidised borrower the subsidised
borrower will be taken to be liable for the whole loan and will be
able to use the full value of their loan limit as if they were a
sole borrower: proposed item 2.
Proposed section 51B is about the monthly
subsidy payable where the borrower s partner dies. Proposed
subsection 51B(1) applies where, at the time of death, the
monthly subsidy was paid in accordance with proposed item 1 of
section 51A and the entitlement of the deceased borrower to the
payment of subsidy is transferred to the surviving borrower under
either section 60 or 61 of the DHOA Act. In that case,
proposed subsection 51B(2) provides that item 1
will continue to apply to the surviving borrower, as if the
deceased borrower was still alive.
Proposed section 51C is about the monthly
subsidy payable where a subsidised
borrower is jointly and severally liable with another
person who is not his or her partner, for the
subsidized loan. In that case, the subsidised
borrower is liable for 50 percent of the total
capital amount owing on the subsidised loan: proposed
paragraph 51C(2)(a). In addition the
subsidised borrower has the loan limit
that is set under subsection 51(2): proposed paragraph
Note 1 which is inserted after proposed subsection 51C(2)
specifies, in order to avoid any doubt, that where a subsidised
loan is shared between the subsidised
borrower and his or her partner, it is proposed
sections 51A and 51B which apply.
Item 21 is an applications provision which
provides that the amendments made by Part 4 of Schedule 2 of the
Bill apply in relation to payment of subsidy during an entitlement
period starting after the day on which the amendments commence.
Part 5 of Schedule 2 relates to the giving of a written
statement of reasons for a decision by the scheme
Existing subsection 81(2) of the DHOAS Act provides that the
Secretary may, by signed instrument, delegate to the scheme
any or all of the Secretary s functions or powers under the DHOAS
Act, other than a power or function under section
73, 74 or 75 which relate to the review of decisions.
Item 22 proposes to omit the reference to
section 73. The effect of this amendment is that the scheme
administrator will have the delegated power of the Secretary s
function to provide written statements of reason for a decision
that may be reviewable, including information about the affected
person s rights.
Members, Senators and Parliamentary staff can obtain further
information from the Parliamentary Library on (02) 6277
7 May 2009
Bills Digest Service
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