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Tax burdens top-of-mind concern for Ontario farmers, survey shows

By Paul Vickers, Vice President, Ontario Federation of Agriculture

A recent membership survey by the Ontario Federation of Agriculture (OFA) identified reducing farm taxes as the number one policy priority for farmers across the province.

More than three quarters of survey respondents identified tax burden as their top concern – a sentiment that has been reinforced by the federal government’s proposed increase to Canada’s capital gains inclusion rate, which is the percentage of a capital gain that is included in a taxpayer’s income. The change was announced in the 2024 budget.

For corporations and trusts, the inclusion rate for all capital gains is proposed to increase from one-half to two-thirds. For individuals, the rate is proposed to increase to two-thirds for capital gains over $250,000 after deductions and exemptions. These measures are proposed to take effect on June 25, 2024.

This is significant for farmers and farm businesses because of what it will mean for farm succession planning and the future economic viability of family farms across the province.

I’m a dairy farmer near Meaford and a Vice President with the OFA. Our family is going through a succession plan with our son who wants to take over the farm, and these changes will definitely make this process more challenging.

We must make sure the farm is passed on to him in a way that will make it possible for him to be able to afford to take over and run the business. Having to sell assets or needing to borrow money simply to pay the increased tax burden threatens the future financial success of the farm and the ability of that next generation to make new investments into the business.

Our family is but one example of many, and this is particularly concerning at a time when a growing number of farmers are approaching retirement and farm succession planning is more important than ever.

The OFA is working closely with the Canadian Federation of Agriculture (CFA) and national accounting firms to fully assess these proposed changes and their impact on farms and farm business succession planning.

In the meantime, farmers are encouraged to discuss the specific impacts of these changes with their accountants to understand the personal and operational effects. OFA also just hosted a webinar on the topic with a national tax expert from BDO which answers many common questions about the proposed increase; it is available to view on OFA’s YouTube channel at youtube.com/ontariofarms.

This increase comes at a time when farmers are already feeling the burden of the federal carbon tax, which is adding significant costs to normal farm activities like grain drying and heating livestock barns and greenhouses – activities that are essential and for which there are currently no practical and feasible alternatives.

OFA, along with CFA and other agricultural organizations, continues to push for an easing of the federal carbon tax burden on food production.

We’ve also been advocating for other changes related to taxation, such as updating critical farm tax programs to reflect modern agriculture. One quarter of all Ontario farm businesses have chosen to incorporate, which is impacting their ability to participate in important farm tax programs, like the Family Farm Exemption for Ontario Land Transfer Tax and the Farm Property Class Tax Rebate Program – and we firmly believe the business structure a farmer chooses should not impact their eligibility for these programs.

Another is updating the provincial Development Charges Act to exempt construction of new farm buildings and structures from development charges. These fees are intended to pay for increased capital expenses costs from development that causes more need for municipal services, but new farm buildings don’t generally use municipal infrastructure.

Advocacy does yield results. Following efforts by the Ontario Federation of Agriculture (OFA) and other organizations, the federal government last fall announced proposed changes to its Underused Housing Tax Act. This includes exempting most farm business partners from having to file a UHT return for 2023 and beyond as long as more than 90% of ownership is by Canadian citizens or permanent residents, and lower penalties for non-compliance.

OFA will continue to advocate for a taxation environment that fosters the growth and sustainability of Ontario’s agricultural sector in both the short and long term.

Source : OFA

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