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August 24, 2022 by Candice McKay

Why farm businesses should move into the cloud

Over the past 10 years, we have seen a great deal of consolidation among agribusinesses. As these businesses grow and accumulate debt, doing the bookkeeping and accounting at the kitchen table is no longer viable. By introducing cloud-based accounting, these businesses are better positioned to address complex reporting requirements.

June 17, 2022 by Bud Arnold

Structuring a farm business to involve the next generation

If you’re thinking about farm succession planning, there are many areas to consider. One key consideration is determining how to include the next generation in the structure of a farm business while the parents are still involved. If you plan to include more than one generation at the same time, there are several ways you can include a child or successor as a partial owner.

April 28, 2022 by Luther VanGilst

Navigating the new Canadian carbon tax credit

There are currently four Canadian provinces that do not have a provincial carbon tax: Alberta, Manitoba, Ontario and Saskatchewan. As a result, their carbon use is taxed on a federal level. In these provinces, farmers generally do not pay carbon tax on diesel and gas used for farm equipment or farm vehicles, but they do pay carbon tax on the propane and natural gas they use.

August 23, 2021 by Bud Arnold

The rules of family farm transitions are changing

When selling a farm corporation, there are tax advantages to selling to a stranger than to someone in your own family. It has always been difficult to transition corporate-owned farms to the next generation, because the sale of a corporation within a family is taxed at a punitive rate – one that would be lower if the buyer was an unrelated person.

July 14, 2021 by Thomas Blonde

Four reasons to consider renting farmland

The advantages of buying property are well known to most farmers. It is a great way to build equity in your business and it usually grows in value over time. In addition, owning farmland offers more tax planning options down the road, allows you to avoid rent increases, gives you more freedom in the way you use the land and protects you from losing access to the land, in the event your landlord decides to sell the land or rent to someone else. However, in spite of all these advantages, there are also several reasons it might be preferable to rent farmland.

June 28, 2021 by Luther VanGilst

New tax savings for farmers buying capital assets

Farmers who are thinking of buying a major capital asset like machinery or equipment may soon see significant tax savings. In the 2021 federal budget, important changes were proposed to the capital cost allowance rules. Before these changes were introduced, capital assets were depreciated according to their class. For example, if a farmer purchased a Class 10 tractor or combine, the capital cost allowance on that asset in the year of purchase was 45 per cent. However, the new rules no longer organize assets by class, instead allowing farmers to fully expense capital assets up to $1.5 million in the year of purchase. 

June 17, 2021 by Luc Joye

The drawbacks of deferring taxes

Most businesses must pay taxes on all income, including accounts receivable and inventory in the year they are created. However, farm businesses are one of the few exceptions, as they are permitted to pay taxes on a cash basis. As a result, they have the unique ability to deduct prepaid expenses and push income into future years. Rather than pay tax on inventory, they can wait until this inventory has been sold. While most farmers prefer to take advantage of this deferral opportunity, this is not always the best option.

February 18, 2021 by Thomas Blonde

How to maximize tax benefits for farm vehicles

While many of the vehicles purchased by farm businesses – such as tractors and other farm machinery – are used exclusively for business purposes, some road-going vehicles (i.e., pick-up trucks, vans) can also be used outside the farm business, which causes complications from a tax perspective. 

December 17, 2020 by Denver Nicklas

Four steps farm businesses can take to minimize the impact of COVID-19

Over the course of the COVID-19 pandemic, farmers have faced a number of significant challenges. With most restaurants operating at diminished capacity or closed outright, the demand for many farm products has decreased. This leaves producers with excess inventory, some of which they have been forced to destroy. Meanwhile, farm businesses in the fruit and vegetable sector have incurred new costs as they modify equipment to keep employees separated by at least two metres, the distance now recommended by Health Canada. Furthermore, many processing plants have invested in barriers and additional space on the line to keep employees separated.

November 4, 2020 by Thomas Blonde

Introducing the Emergency On-Farm Support Fund

Margins are relatively tight in the farming industry and some farmers do not have the financial wherewithal to fully protect their employees from COVID-19. This is a major concern, as farm workers often find themselves living in close quarters, which makes social distancing extremely difficult. 

October 21, 2020 by Helen Orok

Are new capital assets really a wise investment?

Many farmers purchase capital assets in an effort to keep their tax bill to a minimum, as they believe the purchase of a new tractor or other piece of equipment is a good way to reduce their tax liability. However, in some cases, the immediate tax benefits are relatively minor – and purchasing the asset can result in other issues such as cash flow problems. If your corporation purchases a capital asset, the prescribed capital cost deduction available will reduce your tax liability by the corporate tax rate (11 to 31 per cent, depending on your province). While it’s tempting to try to minimize tax, there are several other questions you should ask before investing in a capital asset.

July 28, 2020 by Luc Joye

The benefits of starting a single purpose land corporation

Purchasing land is a common activity in any farm business, but these transactions can be handled in several different ways. For a farm business operating as a corporation, the most common approach is to purchase land within the existing corporation. While this isn’t necessarily a problematic approach, it places all the business’s assets within a single corporation, which limits your flexibility in the future, particularly during the succession process. While you may want to distribute your business’s assets among several children, if the assets are all within a single corporation, you will only be permitted to distribute shares without significant restructuring.

June 10, 2020 by Marla Bilokreli

How rental farm property qualifies for the capital gains exemption

If you inherit a piece of farm property and continue the farming activity on that land, you should qualify for the capital gains exemption when you go to sell. However, even if you choose to rent out that property – rather than farm it yourself – you could still qualify if the land you inherit is from a spouse, common-law partner, child or parent (for the purposes of this article, any member of these groups will be referred to as a “family member”).

May 13, 2020 by Ryan Kitchen

The pros and cons of being classified as a hobby farmer

A full-time farmer gets into the business of farming with the reasonable expectation of profit. When they compile their tax returns, they report all their farm revenue and have the ability to deduct relevant expenses against any revenue on their tax return. Someone who has a farming business on the side with a regular source of income outside the farm would be considered a part-time farmer. In these cases, reporting the farm as a business could be advantageous because the expenses related to the farm might be higher than the income and these losses can be applied against other sources of income, lowering the taxpayer’s liability. In addition to these two options, there is a third classification that presents a different set of advantages and limitations: hobby farming.

November 6, 2019 by Denver Nicklas

Farmers facing an increase in HST examinations

Over the past 12 to 18 months, Canadian farmers have been subjected to a significant increase in HST examinations from the Canada Revenue Agency (CRA). There has always been the potential for close scrutiny, but the instances of this have increased due to an overall change in the CRA’s approach in recent months. While the agency still conducts full-blown audits, it has shown a growing preference for more targeted work. Rather than go to the trouble of sending someone to do an inspection in person, the CRA can look at HST data and quickly determine whether something has been missed or over-claimed. As a result of these examinations, many farmers have had to pay back HST or collect it where they did not in the past. With that in mind, it is important for farmers to know what the CRA is looking for and where it is finding the most costly errors.

October 2, 2019 by Luther VanGilst

Four TOSI exceptions available to farmers

Before new legislation was introduced in 2017 (effective January 2018), tax on split income (TOSI) only applied to minors. Previously, if private corporation dividend income was allocated to someone under the age of 18, that income would be taxed at the highest marginal tax rate. (This is currently 33 per cent federally, with combined federal and provincial/territorial rates ranging from 47.5 per cent to 54 per cent on regular income).