Risk Management a Necessity for Today’s Farmers | FBC, Canada's Farm & Small Business Tax Specialist

Risk Management a Necessity for Today’s Farmers

Risk Management a Necessity for Today’s Farmers

AgriStability and AgriInvest are the backbone of federal and provincial business risk management (BRM) programs for the Canadian agricultural community.

Business risk management represents fully 67% and 73% respectively of federal and provincial expenditures on agriculture in Canada.

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 business risk management 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.

Program Deadlines and Penalties

Now that the deadlines to submit the 2012 AgriStability/AgriInvest Harmonized forms without penalty (September 30) have passed, the last remaining deadline of December 31, 2013 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 2012 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.

This article is an extract of an article by Grant Diamond that appeared in Western Producer, October 10, 2013.

For more information on the state of farming today, view our new Infographic, The Fiscal Farmer.

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