Earlier this week, Finance Minister Bill Morneau announced some modifications to his proposed changes to the Income Tax Act. The announced measures are a step in the right direction, and the government is encouraged to go further by using the guidance provided by the thousands of farmers who have provided input into the consultations.
The announcement focuses on three main areas: removing the proposed restrictions on lifetime capital gains exemptions, a gradual lowering of the small business tax rate from 10.5 percent to 9 percent, and reaffirming measures to restrict income splitting. This third measure needs further tweaking where the onus to prove abuse needs to fall with the CRA and not the taxpayer.
As per the consultations, the government needs to go further in its modifications. Passive income derived from the use of farm assets is a very useful financial risk management strategy. Passive income from farm assets takes a lot of pressure off the government supported Business Risk Management programs and also alleviates farmer reliance on the Canada Pension Plan when passive income supports retired farmers.
It remains strong business advice to encourage farmers to retain a strong relationship with their accountant and farm business financial advisor to keep them abreast on how changes to the income tax act affects their farm business.
Tony Straathof is farmer in Westmeath and a director on the board of both the National Farmers Union-Ontario and the National Farmers Union.
