Defence personnel, veterans slugged up to $130k tax on home loans

Funded by years of service, the scheme provides monthly subsidies to help ADF members and veterans into homes. But a little-known structural flaw in the way the scheme is run means many are paying far more than they should, while others are locked out of the benefit altogether.

The problem sits with the exclusive panel of lenders authorised to offer DHOAS loans.

It is currently made up of just three institutions – NAB, Australian Military Bank and Defence Bank – with the exclusive rights to write loans under the scheme. According to veteran-owned Stanford Financial, Australia’s leading DHOAS broker by loan volume, those three lenders are charging interest rates well above what veterans could access in the open market.

Advertised variable rates on 11 May 2026, before the Reserve Bank of Australia’s 5 May rate decision was passed through, showed NAB’s Defence Force Home Loan sitting at 6.54 per cent, Australian Military Bank’s DHOAS RateSaver at 6.14 per cent, and Defence Bank’s DHOAS Premier Low Rate at 5.69 per cent for loans up to 70 per cent of a property’s value.

By comparison, leading non-panel lenders were offering equivalent products at between 5.34 and 5.84 per cent, a gap of up to 80 basis points.

This means on a $700,000 home loan over 30 years, that spread costs the borrower approximately $130,443 in additional interest.

VIEW ALL

Stanford Group founder and chairman Logan Stanford said the arrangement amounts to nothing less than a government-sanctioned tax on those who serve.

“Three banks have exclusive rights to write home loans under DHOAS. They charge interest rates above the market for the same product.

“The Commonwealth grants the exclusivity in return for commissions paid into consolidated revenue, originally estimated by the Australian National Audit Office at around $170 million over the scheme’s first decade. ADF members and veterans pay that cost through their interest rates. In substance it is a tax on those who serve, collected by the banks,” Stanford said.

But the rate problem is only part of the story. Because each of the three panel lenders has its own credit policy and any veteran who fails to qualify with all three is effectively denied access to the scheme entirely, regardless of their years of service or the size of their entitlement.

Stanford Financial brokers said they routinely spend months, and sometimes years, helping veterans build equity, pay down debt and repair credit histories specifically so they can eventually access DHOAS. An open panel would, in many cases, allow those same veterans to access their entitlement on day one.

Stanford told Defence Connect: “Ultimately, we would love to see more members on the panel, that means more competition, which ultimately means a better service offerings to serving personnel and veterans.”

Even veterans who do qualify with a panel lender often choose not to use the scheme. When Stanford brokers model the DHOAS subsidy against the rate premium on a loan-by-loan basis, the numbers frequently show that a non-DHOAS loan through a market lender leaves the veteran better off.

Stanford added: “Veterans are earning a Commonwealth entitlement for their service and then being denied it twice over. Once by the three lenders’ credit policies, which lock out veterans who don’t fit. And again on the numbers, when the panel rate is so far above the market that the subsidy isn’t worth taking.”

The stakes have sharpened considerably in recent weeks. A Defence procurement process, listed on AusTender as DRH 25/26 DHOAS is currently underway to appoint a new DHOAS panel from 1 July 2026, with an initial term of seven years. Unless the government amends the tender before it closes, the existing three-lender arrangement will be entrenched until at least 2033.

Stanford wrote to the federal government on 11 May, requesting changes to the procurement, arguing the fix is straightforward and requires no legislation.

Section 78 of the DHOAS Act already permits an open declaration of providers, rate parity can be written into panel deeds of agreement, and additional lenders can be accredited. The Department of Defence can act on its own, through the existing tender process.

Stanford said: “I can guarantee you that there are other banks and financial institutions across Australia would be eager to participate in the DHOAS program.”

For context, the government’s First Home Guarantee available to any eligible first home buyer runs through an open panel of 33 accredited lenders, conversely, ADF members and veterans are offered only three.

The call for reform is not new.

In November 2022, member for Herbert, Afghanistan-veteran Phillip Thompson MP OAM, now shadow minister for defence industry and shadow minister for defence personnel, raised the issue of DHOAS panel competition in a second-reading speech to the House of Representatives (Hansard, p. 2523).

Yet three and a half years later, the panel is unchanged.

Stanford said the failure to act is particularly difficult to justify given the broader context. The Royal Commission into Defence and Veteran Suicide identified housing stability and financial wellbeing as significant factors in both retention and veteran welfare.

The 2024 National Defence Strategy has set a target of a permanent Australian Defence Force of 69,000 by the early 2030s, with DHOAS as one of the few non-pay retention tools Defence controls directly playing a critical role in boosting the manpower available to the ADF, saying, “DHOAS is an entitlement earned through years of service in the Australian Defence Force, with the subsidy scaling up the longer a member serves. Not taxing their home loan is the least we as a nation can do for our veterans.”

Stephen Kuper

Steve has an extensive career across government, defence industry and advocacy, having previously worked for cabinet ministers at both Federal and State levels.