Canadian farmers can expect to face crippling shortfalls in their retirement plans now that the federal government has hiked the amount that can be taxed on profits from sales of assets, warns the country’s main advocate for grain producers.
“Our research shows that an average grain farm in Canada, most of which are family owned and operated, will see a tax increase of 30 per cent due to the two-thirds capital gains inclusion rate,” the Grain Growers of Canada said Tuesday in a news release.
For many farmers, their future retirement fund is directly linked to how much they will receive for their farms once they decide to sell.
Currently, 50 per cent of profits earned from sales of assets like land and stocks are subject to federal tax.
Starting on June 25, the amount subject to the levy will be increased to 66 per cent, following changes that were approved in the House of Commons on Tuesday.
Finance Minister Chrystia Freeland, who proposed the increase, said raising the taxable amount to two-thirds would reap nearly $20 billion over five years for the federal government, and about $11.5 billion for the country’s provinces and territories.
Freeland, whose father is an Alberta canola farmer, has suggested the extra revenue could be used to cover pay increases for doctors.
The increase was supported by the governing Liberals as well as Bloc, Green and NDP MPs, but opposed by the Conservatives.
The Grain Growers say an 800-acre Ontario farm that was purchased nearly 30 years ago and is being sold in the current market would require the vending farmer to pay $1.2 million in additional taxes, under the capital gains changes to go into effect later this month.
“With over 40 per cent of farmers nearing retirement over the next decade, this tax increase introduces substantial uncertainty into their retirement planning,” the Grain Growers say.
Farmers, the Grain Growers say, are usually “cash poor and asset rich.”
They “regularly invest in their operations, by expanding their acreage, upgrading grain bins, and purchasing the newest and most innovative equipment, such as tractors or combines.”
The increase in the amount that can be taxed on capital gains applies to individuals only if profits exceed $250,000 in a single year, the government says.
