Many farmers might have forgotten about the federal government’s small business tax changes and are assuming they are not coming.
That’d be a mistake, says the Canadian Federation of Independent Business.
Big changes are still rolling toward farm business reality, and farmers must prepare to face them and encourage the federal government to back off from some of the proposals.
“We’re calling it the ‘new red tape nightmare’ for family run businesses and farms,” said Marilyn Braun-Pollon, who specializes in agribusiness for CFIB.
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“It doesn’t reflect the realities of a farm, the formal and informal ways family members work in the business.”
The federal government eliminated some of the most worrisome elements of its reforms to small business tax rules in the fall, after facing a storm of upset from incorporated family farmers.
Some proposed rules about capital gains taxes and farm exemptions were removed or modified.
However, the changes to income sprinkling, a practice that allowed a business operator to divide income however they chose and to holding passive income remain and could still have major impacts for farmers.
Braun-Pollon said farmers need to realize that the way they pay income to farm family members today could come back to haunt them in the future, and nobody today knows how the Canadian Revenue Agency will interpret the rules when it begins applying them.
“There will be tax court battles across the country (creating) costly and deeply confusing” struggles for farmers who thought they were doing nothing wrong, she said.
The passive income rules could hit farmers who keep business earnings inside their incorporated farm to amass capital for future investment. The sprinkling rules could hit farmers who pay family members for on-farm or farm-related work but have not rigorously documented the work they did.
“It’s really quite troubling,” said Braun-Pollon.
Problems with the implementation of the changes have been highlighted by members of the Senate and the Parliamentary Budget Office.
Braun-Pollon hopes farmers don’t forget the issue and assume everything will be much like it has been. There is still a chance to influence the government to moderate the changes so that they don’t hit farms as hard as they might.
“Listen to the Senate. Delay the implementation for a year. Fully assess the impact.”
