Small business tax changes loom

Be mindful of the federal tax changes recently proposed and how they will affect your farm, spouse and children.

2018 is the year to take careful stock of your financial arrangements. Thanks to the federal government’s changes to tax law, three major issues affect agriculture says Mark Wales, chair of the safety nets section of the Ontario Fruit and Vegetable Growers’ Association (OFVGA).


Income sprinkling – the practice of giving dividends from a small business corporation to a spouse or children for work – is a common practice on the farm. While a contribution test is likely to be instituted, the barriers will not be high for those in agriculture, Wales predicts. This tax change was debated in the House of Commons on December 13 and is expected to receive Royal Assent in March 2018.


Changes to the treatment of capital gains are not expected to affect farmers and their ability to pass the farm to the next generation. 


Of more concern is the future treatment of passive investments says Wales. This topic may not affect farmers as much as professionals such as lawyers and accountants. That said, Wales urges farmers to understand what is projected to happen in the 2018 tax year.  If farmers invest profits in a real estate property, guaranteed investment certificates or other instruments, then the income from these investments is currently taxed at 50 per cent. As Wales explains, most farmers don’t leave free cash invested for long. It is usually reinvested into land or equipment.


“The question for farmers is do they come out and declare having passive investments and pay 50 per cent tax on the annual profits from these investments or do they continue to fly under the radar? My guess is these individuals will be at high risk if they are caught and the penalties will be onerous,” concludes Wales.

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Publish date: 
Thursday, December 14, 2017

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