As we near the end of 2024, the Ontario Federation of Agriculture (OFA) wants to ensure our members are up to date on key tax changes that have impacted farm businesses this year. From updates to the Lifetime Capital Gains Exemption to new filing requirements for HST returns, here is what you need to know:

Changes to the Lifetime Capital Gains Exemption (LCGE)

One of the most positive proposed tax changes this year was the increase in the Lifetime Capital Gains Exemption to $1.25 million, effective for dispositions occurring on or after June 25, 2024. This adjustment, if enacted, would provide crucial relief for farmers transferring assets to the next generation, helping ensure smoother succession planning. OFA applauds this step forward and emphasizes the importance of continuing to index the exemption for inflation, which is set to resume in 2026, to maintain its relevance over time.

It is important to note, however, that this change, along with the proposed adjustments to the capital gains inclusion rate and the Canadian Entrepreneurs’ Incentive, has not yet become law. While these measures were announced with specific effective dates, their legislation has not yet received Royal Assent. This creates significant complexity for farmers incurring capital gains during this period. Taxpayers must decide whether to file based on proposed legislation, and the CRA may reassess returns once the legislation is enacted, especially if it has retroactive application. This presents a real challenge for farmers navigating the uncertainty of this tax year and underscores the importance of seeking professional advice.

Increases to the Capital Gains Inclusion Rate

OFA has expressed concern with the federal government’s proposal to increase the capital gains inclusion rate from 50% to 66.67% for corporations and most trusts—and for individuals on the portion of capital gains over $250,000. For farmers, these changes would create additional tax burdens during asset transfers, potentially undermining farm succession plans and create a disincentive for farmers to reinvest into their business. This measure is proposed to take effect for capital gains realized on or after June 25, 2024.

As with the LCGE changes, this proposal has not yet become law. This uncertainty adds to the difficulty for farmers who incurred capital gains after the proposed effective date of these measures. OFA has been vocal in urging the government to reconsider this change and extend the $250,000 threshold to all farms, including incorporated ones. This adjustment is critical to preserving the stability and growth of family farms across Ontario.

Modifications to the Canadian Entrepreneurs’ Incentive (CEI)

In a positive development, as a result of advocacy efforts by OFA and other farm groups, the proposed eligibility criteria for the Canadian Entrepreneurs’ Incentive were modified to include all qualified farm property eligible for the LCGE.

This change, if enacted, would ensure that the incentive benefits all farmers, regardless of whether their business is incorporated or unincorporated. The CEI would reduce the capital gains inclusion rate to 33.33% on a lifetime maximum of $2 million in eligible capital gains for qualifying entrepreneurs. The lifetime limit is set to be phased in by increments of $200,000 per year, beginning January 1, 2025, and reaching $2 million by January 1, 2034.

Farmers are strongly encouraged to seek professional advice to navigate these proposed changes.

The phase-out of the Accelerated Investment Incentive (AII)

The Accelerated Investment Incentive (AII) has provided a valuable boost to farm businesses by enabling faster depreciation of investments in machinery and equipment. Unfortunately, the federal government has begun phasing out this incentive, with reduced benefits for assets available for use after 2023.

OFA’s research has shown the significant role this incentive has played an important role in spurring farm investment and improving farm productivity, and we continue to advocate for making the AII permanent.

Electronic filing now required for HST returns

Starting in 2024, the Canada Revenue Agency (CRA) requires electronic filing of GST/HST returns for all registrants, except charities and a few listed financial institutions. Filing options include:

• GST/HST NETFILE: Direct online submission.
• My Business Account: Secure CRA portal for business tax accounts.
• GST/HST TELEFILE: Filing via telephone.

Farmers are encouraged to work with their accountants or contact CRA directly if they have questions about electronic filing. For general GST/HST inquiries, call 1-800-959-5525; for technical questions, call 1-800-959-8287. Filing by phone remains a valid option for those without reliable internet access.

Looking ahead

The evolving tax landscape underscores the importance of staying informed. OFA continues to advocate for fair tax policies and provide resources to help farmers navigate these changes. And we encourage members to consult with their accountants and advisors to ensure compliance and to optimize their tax strategies.