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Budget misses opportunity to assist new farmers

But farm leaders like increase in 
capital gains exemption and more funding 
for genomic research

Last week’s federal budget came up short on a tax change that could assist aspiring farmers to get started, says the Canadian Federation of Agriculture.

Finance Minister Jim Flaherty doubled the amount that can be claimed under restricted loss rules for farmers with off-farm income — and then tied it up with restrictions that make the change “a case of one step forwards and two back,” says the CFA.

Section 31 of the Income Tax Act has been a sore point for farm groups and many rural MPs since the late 1970s. It’s supposed to allow someone who buys a farm to claim losses during the startup phase against off-farm income.

The 2013 budget will double the amount that can be claimed to $17,500, but that “only slightly improves the situation” because of restrictive conditions on how the losses can be claimed, said CFA president Ron Bonnett.

“For the majority of new entrants to the industry and small-scale farmers, off-farm income represents a critical support in funding startup costs, making farm expansions, and simply maintaining the viability of many of Canada’s family farms,” said Bonnett.

“This reinterpretation may prevent these farmers from being able to claim more than $17,500 in losses, and may pose a challenge to entering or staying in the industry.

“As agriculture is the sector facing the largest number of impending retirees in the next 10 years, we had hoped the measures would have gone further in addressing this.”

The CFA had recommended the limit be set “at a more realistic $40,000 for new entrants to agriculture.”

But Bonnett and Stephen Vandervalk, president of the Grain Growers of Canada, praised other measures.

They welcomed a $50,000 increase (to $800,000) in the capital gains exemption, which Vandervalk said will be helpful in succession planning this time around.

He also said it appears ag research will be spared from government cost cutting.

“We are reassured to see this year’s federal budget document does not include any further erosion to agricultural research infrastructure, but we will have to wait and see more details about how previous budget cuts are put into practice before we weigh in one way or the other,” said Vandervalk.

Bonnett said an additional $165 million for Genome Canada is good news.

“Considering the domestic and global challenges with climate change and doubling food production for an increasing population, basic research into plant breeds is a priority,” he said.

The executive director of Grain Growers said his organization was hoping to see action on variety registration.

“There is an urgent need for the cereals variety registration system to be reformed in the near future,” said Richard Phillips. “To unleash the power of private industry investment in cereals and wheat research, we need to do a rethink of the current system. For innovation to happen, we need to be able to provide more certainty in the registration process.” 

Another area that will need more work in the near future is the Canadian Grain Commission, he said. With the sweeping changes to the grain sector, more review needs to be done on the commission’s structure and mandate.

Bonnett welcomed tax incentives for clean energy generation equipment and technologies.

“We hope it is structured in a way that allows Canada’s farmers to take advantage of the benefits in a timely fashion,” he said.

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