The federal government introduced the Return of Fuel Charge Proceeds to Farmers Tax Credit in December 2021 to help farmers offset the high cost of the carbon tax. This credit is available for the tax years 2021 and 2022 in Alberta, Manitoba, Ontario and Saskatchewan, the four provinces that don’t have a specific agreement in place with the federal government regarding carbon tax. While this could be a significant help to many farms, not every business that stands to benefit is aware of this opportunity. With that in mind, here is a breakdown of the fuel charges tax credit.

Eligibility

Businesses are eligible if they file a farm tax return ⁠–⁠ whether as a sole proprietor or a partnership ⁠–⁠ and prepare a T1163, which is the farm return statement prepared on a personal tax return or the farm statement prepared on a corporate tax return. To qualify, businesses must also record at least $25,000 in eligible farm expenses, which is defined as all farm‑related expenses except for non‑arm’s length transactions (i.e., salaries for family members) and any inventory adjustments, whether mandatory or optional.

Amount available

If your farming expenses exceed $25,000, you qualify to get a return of your fuel charge at a rate of $1.47 for every $1,000 in eligible farming expenses for 2021. In 2022, this amount will increase to $1.73 for every $1,000 in eligible farming expenses. It’s also worth noting the amount returned will be included in your taxable income.

Notice of assessment

While this tax credit was introduced in an economic update late in 2021, those who tried to claim it on 2021 tax returns saw the processing of those returns delayed because this credit had yet to receive royal assent. The Canada Revenue Agency did not start processing these returns until June 9, 2022, which caused significant concern for many businesses, as a notice of assessment is required for lending and other financing purposes. Now that this credit has received royal assent, anyone who filed a 2021 tax return on time should have received their refund and notice of assessment.

Retroactive claims

Those who failed to make claims on their 2021 tax returns still have the ability to go back and amend those returns. Claiming this tax credit is a valuable opportunity to retroactively recoup some costs or tax. All you need to make this update is a T1 or T2 adjustment form. But before you take this step, be sure to check with your accountant and confirm this wasn’t already claimed. Depending on the size of your farm and the amount of eligible expenses you’ve claimed, this credit could be worth between $500 and $1,500.

Meet the Author

Ryan Kitchen
Yorkton, Saskatchewan
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