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November 23, 2017 by Robert Fischer

How AgriInvest and AgriStability are changing

AgriInvest and AgriStability are two government subsidy programs that have been extremely valuable to Canadian farmers in recent years. AgriInvest allows farmers to put a percentage of their sales into a fund, where these contributions are matched by the government. The idea is to put money away in your best years, creating a cushion if you are ever short of cash or need extra funds to pay for equipment and supplies.

With AgriStability, your current year is compared to an average of three of the past five years, removing the best and worst years from this equation. If you fall 30 per cent below the average (in other words, if you have a really bad year), you are eligible for additional funding from the government. Both of these programs continue to be extremely valuable to farmers, but they have undergone recent changes that are worth noting.

AgriInvest: The current system

Farmers are permitted to deposit one per cent on up to $1.5 million of eligible sales (the contribution margin) – including grain, cattle, hogs and chickens – minus the money spent on those commodities. For example, if a cattle rancher sells $1 million worth of cattle, spends $200,000 on grain and hay to feed them and buys another $200,000 of cattle in a year, the margin would be $600,000. This farmer would be able to contribute one per cent of that ($6,000), which the government would match. 

AgriInvest: 2018 updates

The core rules of AgriInvest have not changed, but starting in 2018, the cap will be reduced from one per cent of $1.5 million to one per cent of $1 million. That’s a 33 per cent reduction in the maximum amount that can be contributed. While this means farmers are more limited to the program’s benefits, there is still no significant downside to AgriInvest. In essence, this program gives farmers access to free money. We always encourage clients to consider this opportunity, whether they are new to farming or veterans of the industry. When the government is willing to match your contribution, you should always take advantage of the opportunity.

AgriStability: The current system

There are two ways to calculate the reference margin in AgriStability, and the program uses the lower of these numbers. One is called a production margin – allowable revenue like cattle and grain minus allowable expenses (similar to AgriInvest) plus any direct costs, including fertilizer, chemicals, power and crop insurance.

The second calculation is the lower of production margin and allowable expenses, which looks at just the expense portion. For example, farmers that grew and fed their own feed could have lower expenses than farmers who did not grow their own feed, purchasing it instead.

AgriStability: 2018 updates

In 2018, the second calculation will only be able to reduce the original reference margin by a maximum of 30 per cent, which still guarantees producers at least 70 per cent of their original reference margin. In addition, provincial governments now have the ability to allow farmers to enroll late based on a government decision. This is usually a disaster-based situation where the province is in a better position to make a determination than the federal government. (Recent examples include early snow and wet weather that have prevented crops from being harvested in some parts of Canada.) However, if you enroll in the program after you’ve seen a decline in your productivity, a 20 per cent reduction of the benefit is imposed.

AgriInvest vs. AgriStability

As a farmer, you are free to enroll in both of these programs. Some clients resist all programs of this kind, under the assumption they will be forced to pay expensive accounting fees for the work involved, but there is little accounting work required in AgriInvest, making it desirable for clients from any perspective. In contrast, we have seen many clients drop out of AgriStability because they have to pay to enter the program, there are other up front fees and the program results in higher accounting fees. Before making a decision about either program, meet with a Collins Barrow advisor for an expert perspective.

Robert Fischer, CPA, CA, is a partner at Collins Barrow Red Deer LLP. In addition to providing integrated assurance, consulting and tax advice, he serves as leader of the firm’s agricultural practice area.