GUELPH – The Ontario Federation of Agriculture (OFA) is actively addressing concerns from Ontario farmers and farm businesses regarding the federal government’s proposed increase to Canada’s capital gains inclusion rate. The change was announced as part of the 2024 federal budget.
There are several changes. For corporations and trusts, the inclusion rate will increase from one-half to two-thirds for all capital gains.
For individuals, the inclusion rate will increase to two-thirds for capital gains higher than $250,000 after deductions and exemptions. These measures are proposed to take effect on June 25, 2024, something that was confirmed as recently as May 22 by Deputy Prime Minister and Minister of Finance, The Honourable Chrystia Freeland.
Budget 2024 also proposed to increase the Lifetime Capital Gains Exemption (LCGE) for qualified farm property from $1 million to $1.25 million and continue adjusting it for inflation after 2026.
This change has significant implications for farm succession planning and the economic viability of family farms because of the burden it places on Ontario’s farm businesses, particularly at a time when a growing number of farmers are approaching retirement and farm succession planning is more important than ever.
The increase in capital gains inclusion would make farm succession planning less financially viable and present significant challenges for farmers who want to reinvest in their business.
OFA is working closely with the Canadian Federation of Agriculture and national accounting firms to fully assess these proposed changes and their impact on farm businesses and farm business succession planning. To help facilitate this, OFA hosted a webinar in partnership with tax experts from BDO Canada on May 16 to discuss these changes.
In light of these changes, farmers are being advised to consult with accountants and to discuss the specific impacts of these changes with their accountants to understand the personal and operational effects. They should also review their business plans and update business plans and asset management strategies as deemed necessary considering the proposed changes.
With the proposed implementation date of June 25, 2024 quickly approaching, farmers are encouraged to consult with their accountants regarding any potential activities that could help mitigate increased tax liabilities.
For more information, you can visit ofa.on.ca or contact Ben Lefort, at 519-822-0589 or by email. (ben.lefort@ofa.on.ca).
