Capital gains changes: Farmers say feds’ latest effort ‘doesn’t go far enough’
Global News
The federal government is speeding up the rollout of the Canadian Entrepreneurs' Incentive while also expanding eligibility to include the sale of farming and fishing property.
Some Canadian farmers say changes to a federal incentive billed as a method to lower the impact from the capital gains inclusion rate increase “doesn’t go far enough” and are calling on Ottawa to return the inclusion rate for farmers to what it was before this year’s change.
On Monday, the Department of Finance provided more details on the Canadian Entrepreneurs’ Incentive (CEI), which when first announced in April stated that it would reduce the capital gains inclusion rate by half — to 33 per cent — up to a $2-million limit by the time it was fully rolled out in 2034.
The new change has advanced that to 2029, with incremental increases of $400,000 starting in 2025.
The incentive also only allowed for founders of a business to be eligible, but that’s now been removed and a requirement of holding 10 per cent or more of shares has been reduced to five per cent.
Under Ottawa’s changes, the inclusion rate for taxable capital gains increased from 50 to 67 per cent for individuals realizing more than $250,000 of those gains annually. However, that same increase will also apply to all such gains made by corporations and many trusts.
“It certainly doesn’t go far enough,” Kyle Larkin, executive director of Grain Growers of Canada, told Global News. “It will benefit some farms across Canada, but most farmers aren’t going to see a benefit from it and they’re going to still see a tax increase.”
With many farms in Canada incorporated, the Grain Growers of Canada say while a farmer’s primary residence does not face the capital gains tax on sales, they’ll still face that 67 per cent rate on all gains realized from the sale of farmland.
To give perspective, Grain Growers calculates that an Alberta farm of about 2,500 acres purchased for $1,385,000 in 1996 could potentially sell for about $17,250,000 in 2023 for a profit of $15,865,000 before taxes.
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