Fall can be a busy time for farmers, but a deadline looms during this period: the submission of AgriStability returns.
It is highly possible that your accountant will call you before the deadline to ask questions about yields, inventory and input costs for previous crop years.
It is essential to maintain an organized farm book throughout the year to limit the amount of questions and to make answering them easier.
The breakdown of certain accounts, such as utilities and insurance, is important with AgriStability. The Agriculture Financial Services Corp. (AFSC) recognizes certain income and expenses to be allowable and non-allowable.
The difference between your allowable revenues minus your allowable expenses is used as a basis for your claim and can affect the amount of subsidy you receive. Creating a more detailed farm book could possibly increase your AgriStability claim.
Allowable income items are usually limited to the sale of commodities and production insurance payments. Allowable expense items relate directly to the primary production of agricultural commodities.
Best practice tips to maintaining useful records to help prepare an AgriStability claim include:
Commodity sales and purchases
Commodity sales and purchases are considered allowable under the AgriStability program. When recording commodity income or commodity purchases, it is important to write down the name of the buyer, the type of commodity, the grade, the quantity and the measure of unit.
Various types of insurance premiums are paid through the year. Within AgriStability, the AFSC recognizes only crop insurance as an allowable expense. Therefore, highlighting specifically what insurance is crop insurance or making a separate account specifically for crop insurance makes it easier to identify and allocate as allowable.
The AFSC breaks down utilities into three categories: electricity, heating fuel and telephone. Electricity and heating are allowable while telephone is not. Separating electricity, heating and telephone into three separate accounts is essential for maintaining clean records.
Arm’s length salaries, which are paid to people whom you are not related, are allowable under Agri-Stability. Non-arm’s length salaries, which are paid to people whom you are related, are not allowed.
To ensure appropriate allocation, write the individual’s name in the description of the payment and then separate the arm’s length and non-arm’s length salaries into two separate accounts. This includes Canada Pension Plan, Employment Insurance and Income Tax.
The only allowable freight expense is trucking commodities to market. For instance, shipping cattle for custom feeding is not allowed while shipping cattle for slaughter is allowed.
Highlighting within the description if the freight is to market or not to market will provide a clear trail to your claim for allowable expenses.
The allocation between allowable and non-allowable income and expense items is an important part of the AgriStability program.
Understanding how to make the allocation and keeping the appropriate records can make a difference on the amount of your claim.
Consider seeking the help of a professional adviser on your next claim to ensure you get the most out of the program.