The Agricultural Producers Association of Saskatchewan (APAS) has been active the last three months, fielding calls and concerns from Saskatchewan farmers about small business tax changes proposed by the federal government, and how they would impact Saskatchewan farmers.
The changes were brought forward by the federal government in July, drawing the ire of farmers and other small business owners. But the government has been announcing changes to the tax reforms this week, easing fears among many.
APAS president Todd Lewis said he was pleased to see the government make changes regarding passive investments, which was a big source of concern in the agriculture sector. Under the new legislation, up to $50,000 of passive investment income annually can now be sheltered before higher tax rates are imposed.
The government describes passive investment income as investment of money left in a corporation, for purposes other than to invest directly in growth.
The federal government also pledged to reduce small business tax rates to 10 per cent, as of Jan. 1, 2018, and then to nine per cent as of Jan. 1, 2019, measures that Lewis also applauded.
Then the government announced its plans on Thursday to quell concerns that farmers have about succession planning. Lewis said many producers were worried that it would cost more to turn the farm over to future generations, than it would to sell it to a third party.
He also noted amendments to the capital gains exemptions will make it easier for succession planning.
“There’s a huge tax liability with the value of land, so I think there was lots of concern with capital gains exemption and how they were going to make changes to that,” said Lewis. “It seems like they’ve backed off on that as well, they’re not going to change the capital gains.”
The proposed changes were a source for farmers in the last three months, Lewis said. Many producers have been worried about consequences, particularly when it came to succession planning.
“Succession planning is not something you do overnight,” said Lewis. “In some cases, it involves people who have been involved with corporations for years and years, if not decades.”
He expects it will take some time to go through the amendments to the legislation and see how they will impact producers.
“As with any changes in the taxes, it’s pretty complicated, and can have some intended and unintended consequences,” said Lewis. “I think a lot of guys have a wait and see attitude. I think that’s probably safe to say where we are at APAS, too. We just hope the government has heard a lot, and hopefully they’re listening.”
The family farms drive agriculture, he said, and it’s important for them to be protected.
“Hopefully the farm can be passed on to future farmers without a huge tax bill,” said Lewis. “No farm can be sustainable with if they have to pay a huge tax bill every 30 to 40 years, when the farm turns over to the next generation.”
Part of the problem, he said, was these changes came up in a hurry. They weren’t included in the federal budget in March. It took a couple weeks to determine what the implications of the changes would be.
Also, the consultation period for the changes took place during harvest.
“The accounting industry was very concerned about it, and once farmers started talking to their accountants (they were concerned),” said Lewis. “A lot of the changes, when you start talking about taxes, are very technical and so on, and not very easy to understand what the implications are.”
Lewis believes these changes have caused people to look at where they’re at with their tax planning. Some farmers have had conversations with their accountants on how these changes could impact their taxes moving forward.
“Everyone’s certainly aware of what’s going on, and they’re paying close attention to what’s being proposed here,” said Lewis.
