INDIVIDUALS
There will be a large increase in the Lifetime Capital Gains Exemption relating to qualified Farm properties, going from the current $813,600 to a full $1 million. Whether farmers are looking to retire, sell or start the transition to the next generation, this change could significantly reduce taxes and affect planning.
Tax Free Savings increase
Annual Tax Free Savings Account (TFSA) limits will increase from $5,500 to $10,000 annually. That means you can invest more cash without having to pay taxes on the income or growth of those investments.
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Retirement
The Annual Registered Retirement Income Fund (RRIF) minimum withdrawal limits will be reduced for individuals aged 71 to 94 (though will stay at 20 percent for those aged 95 and above). At age 71, the minimum withdrawal will be 5.28 percent, at age 94 it will be 18.79 percent, and it will remain the same at age 95 at 20 percent. These minimum withdrawals are down from the previous range of 7.38 percent at age 71 to 20 percent at age 94. As Canadians work longer and are earning other income into their later years, this will add flexibility with tax and retirement planning.
CORPORATIONSAND BUSINESS
The budget proposes a big change for small business by reducing the small business tax rates, which over the next four years will go down to 9 percent from the current 11 percent. The change will be phased in gradually, going down half a percent each year until 2019.
The government is also considering increasing what kind of business activity can be considered under the small business deduction. These proposed changes provide more incentive for incorporated farming operations to keep money in a corporation, or to incorporate for the first time.
Ag Co-op dividends see extended deferrals
There is currently a tax deferral available that allows some members of agricultural co-operatives to defer including income for tax purposes some of their patronage dividends on their Ag Co-op shares. Currently, this tax deferral applies only to shares issued after 2005 and before 2016. However, the budget extends this until 2021, meaning more tax deferrals available for farmers in these co-ops.
OTHER ITEMS
Similar to the previous budget, the government continues to look at how eligible capital property is dealt with. This could have a significant impact on farmers who are looking to buy or already own water rights and quota. It is still under consultation, so farmers should watch for possible changes in the future.
Overall, the budget offers a long-term plan, starting with an expected deficit of $2 billion, but with future plans for surpluses. This short-term spending and long-term growth may present big opportunities. It is important to discuss the changes with your accountant, to determine the best ways to make them work for you.
