Being employed with the ADF provides you a position of strength when it comes time to buying a property. Here are our top 10 tips to consider:
1) Shop around for your loan. There’s no need to accept the first offer that comes along. Why not go to several lenders, including those on the Defence Home Ownership Assistance Scheme (DHOAS) list? Don’t simply assume that a DHOAS lender will always offer you the best deal. Take your time to consider all the deals on offer because a small saving now may add up to a considerable amount (often tens of thousands of dollars) over the term of your loan;
2) Think carefully about how much you can comfortably borrow and service, understanding that interest rates are likely to rise during the term of your loan, resulting in an increase in your monthly repayments or an extension in the term of the loan (or both);
3) Do a “stress test” on your repayments. That is, calculate (or ask the lender to show you) what would happen to your repayments if interest rates rose by, say, 0.5% to 2%. You might be unpleasantly surprised by the outcome, so ask yourself whether you could afford the increase. If the answer is ‘no’, consider a smaller loan or find another property that passes the “stress test” (remember that only 20 years ago, interest rates on mortgages in Australia were closer to 10% and in the 1980s they were closer to 20%, sometimes more….we’re not suggesting that will happen again, but it is worth remembering that rates are likely to vary, maybe substantially, during the term of your loan);
4) Contemplate what the consequences would be on your capacity to meet your mortgage repayment commitments should you or a family member suffer a loss of income or employment. In that regard, we recommend having a fall back position, such as three months’ of “rainy day” money in a bank account to cover living expenses should the need arise;
5) Unlike many other countries, most home mortgages in Australia are based on a variable interest rate. So when rates are rising think about locking in (aka “fixing”) your rate on part or all of current your mortgage (subject to clearly understanding any fees, charges, penalties and conditions in so doing);
6) During the term of your loan, don’t hesitate to regularly assess whether your current loan is still competitive. Provided you have reliably serviced your mortgage (and especially if you’re still an ADF member when you assess your options), you may well find a better deal elsewhere;
7) Remember that property is a long term investment (10 years plus). Therefore, don’t expect a capital gain to accrue overnight. If it does, consider it to be a bonus. And remember that property prices can and often do fall, so factor that real possibility into your mindset when considering a purchase;
8) Remember the old property adage…the three important factors to consider when buying property are “location, location, location”. This is especially true when market sentiment turns negative. The key point here is to buy the best quality property you can afford in a desirable location, close to, for example, schools, amenities, transport and populations centres. That way, when you come to sell or rent the property, it will be in demand, relative to lower quality properties that are likely to be out of favour with potential buyers and renters;
9) Your first acquisition doesn’t need to be the property of your dreams. Maybe you could buy a smaller apartment or house at a lower cost and then slowly and carefully build your financial position until you’re in a position to purchase the property that you’ve always wanted;
10) Buying in a regional area can be a sensible and often cheaper alternative to stretching your finances in a capital city. This option has become increasingly common as a result of the pandemic which has encouraged a considerable number of family and work relocations to the country regions of Australia, combined with improved connectivity facilitating working from home.
Super can be much harder to quantify if you are a member of MSBS or DFRDB, known as defined benefit schemes. This is because the bulk of your super benefit will likely be in the form of a lifetime indexed pension, based on your years of service and final average salary. The longer you stay in Defence, the larger your lifetime pension. This cannot easily be compared to a standard accumulation super fund. Please contact the Commonwealth Superannuation Corporation (CSC) for an estimate or your current benefit.
If you have an accumulation super fund, like ADF Super, it’s much easier to compare the superannuation you get from Defence with that of a civilian employer. Generally employers pay super at a rate of 9.5% of your ordinary salary and allowances, Defence pays super to accumulation fund members at a rate of 16.4%, well above the minimum requirement.
You may not appreciate the value of your generous superannuation benefits now, but you certainly will in years to come.
ADF members receive, statutory death and invalidity cover, and rehabilitation services if needed. To replace this cover in civilian employment, you may need to take out personal insurance, such as death, disability, trauma and income protection. The cost would depend on your age and personal circumstances but could cost thousands of dollars a year.
The ADF offers free education and training and/or study assistance schemes. If you’ve been receiving tertiary education at no cost or received any form of study assistance, consider what it might cost to continue your education outside Defence.
Take some time to think about these and any other benefits provided to you by Defence to get a better understanding of the real value of your employment package.
As an ADF member you will usually receive subsidised housing or rental assistance if you are not living in your own home. If you buy a home to live in you may be eligible for a range of other assistance schemes.
If you are receiving rental assistance you can calculate the value by multiplying the fortnightly assistance amount by 26 to get an approximate annual benefit.
If you’re in service housing you can estimate your benefit by deducting the rent contribution taken out of your pay, from the amount of rent you would pay each fortnight for a similar property in the same area. Multiply the result by 26 to estimate your annual benefit.
Housing assistance schemes for members buying a property include the Defence Home Ownership Assistance Scheme (DHOAS), Home purchase assistance scheme (HPAS) and Home purchase or sale expenses allowance (HPSEA)
Serving ADF members receive a range of healthcare benefits, including free medical and dental treatments, rehabilitation services, psychological support and access to fitness facilities like gyms, pools and sporting fields.
To put a value on these benefits, think about what you might be paying for if you were not an ADF member. For example, what would it cost you for private health insurance, prescriptions, physiotherapist, dentist, specialist visits, gym membership or other fitness related costs?
Medicare covers the costs of being admitted to hospital as a public patient, some of the fees charged by GPs and other medical professionals, and subsidised prescription costs for medicines listed on the Pharmaceutical Benefits Scheme (PBS). ADF members don’t pay the Medicare levy, currently 2% of taxable income.
Private health insurance covers some or all of the cost of a range of services not covered by Medicare, for example, a private hospital and the doctor of your choice, as well as ancillary services such as dental, optical and physiotherapy, not covered by Medicare.
Your pay consists of a base salary, with the addition of employment-related allowances. Your base salary can be found at the top of your payslip on the right, listed as ‘Annual salary’. If you need help reading your payslip, see the ADF guide on Pay and Allowances.
Note: From 13 May 2021, service, trainee, reserve and uniform allowances will be rolled into a single ‘Military salary’.
The earnings section of your payslip lists any allowances you receive. The amount in the ‘Current’ column is the amount you get every fortnight for each allowance. You can add allowances by typing in the name of the allowance in the ‘Add allowance’ box and clicking the + symbol.
A deployment provides some ADF members with additional allowances that are not part of regular pay. We have not included these allowances in the calculation of your remuneration package, however, you may want to take the additional deployment allowances into account if you are comparing your ADF remuneration with civilian employment.
Medium-term goals are those that you want to achieve in 3-6 years. This could include saving for a home deposit, paying off your car or paying down all your loan debts. Having a budget and your goals written down.
Long-term goals are plans you want to achieve in around 7 years or more. This could include buying a home or paying off your mortgage, paying for your children’s education or saving for retirement.
For long-term goals think about investing some of your money. Get some financial advice to work out a good investment strategy to reach your goals.
Be financially fit from ADF Consumer Centre on Vimeo.
MSBS is a hybrid defined benefit and accumulation super scheme which closed to new members on 30 June 2016. If you are an MSBS member, your benefit will consist of a lifetime indexed pension (employer component) based on your final average salary and years of service. Some or all of this benefit can be taken as a lump sum when you have met a condition of release (the defined benefit). The scheme also has a member component made up of your compulsory and voluntary personal contributions, ancillary contributions and investment returns, that you will also receive as a lump sum when you have met a condition of release (the accumulation benefit).
The pension component can be taken from age 55. If you are retiring or resigning from the ADF after reaching age 55 or are entitled to a Class A or Class B invalidity pension, you will be eligible for a pension when you leave the Service. For all other members, your employer benefit will freeze and be preserved, increasing with CPI each year, until you are eligible to receive it.
The member component of your benefit may be left in MSBS, where it will increase with investment returns each year until you access it, or it can be rolled over to another complying super fund.
For more information contact the Commonwealth Superannuation Corporation (CSC).
If you joined the ADF for the first time after 30 June 2016, you will fall under the ADF superannuation arrangement, and will be a member of an accumulation fund, such as ADF Super. If you had previously served, and are a member of MSBS, you will be re-entered into MSBS on rejoining the Service.
For accumulation fund (eg. ADF Super) members, your benefit will be a lump sum based on contributions and investment returns. When you leave Defence, your money can be left in the fund, where it will continue to grow with investment returns until you meet a condition of release, or it can be rolled into another super fund.
If you’ve been in the Service for more than 12 consecutive months, you can keep your ADF Super account when you transition out and your new employer can contribute to ADF Super. In this case your insurance cover will change so contact the Commonwealth Superannuation Corporation (CSC) to find out what you need to know.
DFRDB is a defined benefit super scheme which closed to new members on 30 September 1991. If you are a DFRDB member, you will receive a lifetime indexed pension based on your final salary and years of service. Part of your benefit may be commuted into a lump sum, and you may receive an additional lump sum from your MSBS ancillary account, made up of voluntary personal contributions, amounts transferred in from other funds and other contributions, plus investment returns.
For more information contact the Commonwealth Superannuation Corporation (CSC).
Short-term goals are things you want to achieve within the next couple of years. These goals could be to pay off your credit card debt, buy a new TV, go on a holiday or buy a car. Whatever you have in mind, set yourself a realistic timeframe. The best way to save for short-term goals is to reduce your spending on non-essential items, like entertainment, dining out, memberships or subscriptions. It is often easier to stay on top of your spending if you use cash, EFTPOS or a debit card when shopping instead of using your credit card.
Make your savings work for you by putting your money into an account where it will grow. Savings accounts are great because you can earn compound interest on your savings. If you’re on a low income, you may qualify for one of the savings programs offered by some charitable organisations.