By Suzanne Armstrong
CFFO has long emphasized the importance of family farms. Strong family farming businesses are vital to the prosperity of agriculture, the health of our rural communities, and the stewardship of our arable land across the country. According to Farm and Food Care’s “The Real Dirt on Farming,” family owned and operated farms make up 97% of farms in Canada.
Listen here:
[audio mp3="http://blackburnnews.com/wp-content/uploads/2017/01/2017-01-13-Bill-C-274.mp3"][/audio]
However, Canada’s tax regulations need to change in order to remove hurtles to family farm succession. A new Private Member’s Bill C-274 seeks to do just that.
Guy Caron, a New Democratic Party MP for Rimouski-Neigette-Témiscouata-Les Basques, is sponsoring Private Member’s Bill C-274 which seeks to address tax rules that disadvantage selling a farm business to a family member. The Bill proposes changes to the Income Tax Act, which, according to Caron’s website, “will allow owners and buyers in the same family to enjoy the same rights and privileges as those for a transaction between non-related persons.”
The problem is that currently if a farm business is sold to a family member the income from the sale is considered a dividend, but if it is sold to a person at “arms length” the income is considered capital gain. As Caron points out, “unlike a capital gain, a dividend does not include a lifetime exemption and is taxed more heavily.” In order to prevent any attempts at tax evasion, the Bill includes a requirement that the purchasing family member maintain ownership of the business for at least five years for the new rules to apply.
Current tax rules are yet another hurtle to family farm succession. Currently only about 19% of farmers have a succession plan. With the average age of farmers in Canada at 54, succession planning for family farm businesses is vital. Succession plans ensure that farming assets are passed onto the next generation of farmers, including the land, buildings and equipment, as well as the farming knowledge.
The proposed changes to the Income Tax Act in Bill C-274 would make it easier for family farm businesses to be transferred to the next generation within a family, rather than being sold to a third party. It is vital to remove financial disincentives from our tax system that prevent succession of family farm businesses within families. Active discussion on this issue will encourage the government to take notice. Because of the challenges Private Member’s Bills face within our parliamentary system, I would encourage farmers to draw attention to the bill with your local MP to garner their support.
