By Amanda Brodhagen, Farms.com
Ontario’s largest farm lobby group, the Ontario Federation of Agriculture (OFA), says Canadian farmers are at a disadvantage when it comes to income tax calculation, and is asking its members to bring up the issue with their members of Parliament.
The federal government’s interpretation of The Income Tax Act, which is stated in the 2013 Budget-implementation bill (Bill C4), was outlined in the OFA’s weekly commentary this week. The commentary was written by Debra Pretty-Straathof, Executive Member of the OFA.
Section 31 is the part that OFA takes issue with, as it pertains to agriculture. The interpretation of this section has been widely debated, with the controversy lying in situations when a taxpayer has both farming and another source of income. Currently, the interpretation is that off the farm income must be less than the farming income in order for a farmer to be eligible to claim farm losses.
OFA argues that Section 31 doesn’t fairly reflect a farmer’s income level, and makes the case that this interpretation is a barrier which could keep young people farming. The farm group says this issue is more important now than ever, noting that about 25 per cent of farmers are expected to retire within the next 10 years, and the current interpretation of the Tax Act is a strain for young people wishing to remain or take over the family farm.
Barriers for young and new farmers have been widely studied. For example, in 2012, Farms.com conducted a survey on behalf of the Junior Farmers’ Association of Ontario (JFAO), which identified some of the key barriers facing young and beginning farmers. The study found that access to land and a minimum of a 25 per cent down payment on farmland was the most significant barrier for new entrants. The OFA agrees and says young farmers and new entrants are often burdened with significant expenses needed to start farms.
In 2012, the issue was taken to the Supreme Court of Canada, in the Craig v. The Queen, where the court ruled that “if an examination of time, investment, industry engagement and proportion of daily routine determined that farming was the chief source of income or a component of that chief source, the loss deductions should not be limited.”
The OFA wants the federal government to respect the Craig interpretation of Section 31, concluding that farmers shouldn’t be penalized for working two jobs to help offset significant capital expenses, such as purchasing farm equipment and land. OFA is calling on its members to contact their MPs. Members can email a letter to the their MP by visiting OFA’s website at:www.actnow.ofa.on.ca.