AgriStability and AgriInvest are the backbone of federal and provincial business risk management programs for the Canadian agricultural community, says Grant Diamond, a senior tax consultant with FBC, a tax advisory service with over 60 years of service to the farm community. Indeed, farm risk management programs represent fully 67% and 73% respectively of federal and provincial expenditures on agriculture in Canada for 2015.
To gain some perspective on just how important these payments are to the farming community, program payments have tripled in the past 15 years and in the last 10 years alone have actually surpassed aggregate net farm income. Interestingly enough, in the same period farm risk management program payments have increased while farm income has not.
If $35,000 per year in household income is considered a minimum comfort threshold for a Canadian family, more than 55% of farms in Canada do not reach this standard and must rely heavily on off-farm income and government support. Even for farms with gross family income between $100,000 and $250,000, the average amount from the farm operation is only $21,681 with program payments averaging $13,202 and off-farm income averages at $29,997. For farms with less than $100,000 in gross family income, program payments are either sometimes equal to but mostly greater than operating income from the farm. In fact, farms in the category of $50,000 to $99,000 of gross income, program payments represent 97% of operating income.
The above information was extracted from a report on the impact of agriculture farm risk management programs in Canada by the George Morris Centre, an agri-food think tank based in Guelph, Ontario.
Now that the deadlines to submit the 2014 AgriStability/AgriInvest Harmonized forms without penalty (September 30) have passed, the last remaining deadline of December 31, 2015 still remains but with a penalty of $500 per month reduction in program payments. This could be in addition to a 20% penalty in your enrollment fees, if you happened to pay your fees more than 30 days after receiving your 2014 enrollment notice.
So, for farms dependent on their AgriStability payments for a large portion of their operating income, this could have a serious impact on farm family income.
To avoid penalties, some individuals have resorted to a variety of creative tactics that have caught the attention and generated some irritation on the part of at least the Alberta side of the AgriStability program.
To meet the appropriate deadlines, some individuals were filing applications with false or incomplete information with the intention of correcting the application at a later date. Essentially, applicants were either providing amounts on various line items which were substantially changed after the filing deadline or providing new detail on line items that were previously left unpopulated with data.
The Alberta AgriStability program is looking at ways to incorporate additional penalties for filing incomplete or inaccurate claims to prevent this practice from happening in the future.
If Alberta is considering imposing additional penalties, other provinces will soon follow.
Grant Diamond is a tax specialist with FBC, a firm dedicated to providing farmers and small business owners with expert tax services and advice for over 60 years. FBC has branches in BC, AB, SK, MB, ON and NS to serve its 50,000 Members. FBC also provides financial & estate planning. To learn more about FBC, visit www.fbc.ca. If you have any questions regarding this article, email fbc @ fbc.ca or call toll-free 1-800-265-1002.
Accurate as of April 08, 2015