High summer will bring higher capital gains taxes, following a federal move to raise the inclusion threshold from one-half to two-thirds of capital gains of over $250,000 per year for Canadians while limiting the lifetime capital gains exemption for individuals to $1.25 million.
“Most middle class entrepreneurs won’t pay more tax because of these changes,” claims a backgrounder from the federal finance department regarding the changes, which take effect June 25. “These changes will make Canada’s tax system fairer by making taxation more income-neutral—these changes narrow the tax advantage between capital gains and other forms of income, particularly paycheques.”
However, many farm groups say the changes will neutralize income seen on the intergenerational transfer of farm properties, not least because most types of trusts and all corporations, including incorporated family farms, enjoy no exemptions. They’re automatically subject to the two-thirds inclusion rate.
“By increasing the capital gains inclusion rate we are neutralizing the increase to the [lifetime capital gains exemption] and jeopardizing the success of genuine intergenerational farm transfers and the financial health of the next generation of farms across Canada,” the Canadian Federation of Agriculture said in a statement following the legislative change earlier this month.
With 40% of Canadian farm operators set to retire over the next decade, the CFA (to which the BC Agriculture Council defers on national matters) says tax measures cannot jeopardize the capitalization of the next generation of farmers.
Other farm groups have voiced their own concerns.
Grain Growers of Canada expects its members to see a tax increase of 30%, taking a bite out of farmers’ retirement plans and undercutting the financial footing of their successors to benefit government coffers.
“A 30 per cent increase in taxes on the family farm also dramatically increases the cost of farms, pricing out many families,” said Grain Growers of Canada executive director Kyle Larkin. “This puts the family farm at risk, as the only ones that will be able to afford to pay millions of extra dollars will either be corporate farms or development companies.”
The Canadian Cattle Youth Council, which represents young ranchers, has also come out against the changes.
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