On June 25th, the government will increase the capital gains inclusion rate from 50% to 66%. While the intended goal was to target the “wealthiest Canadians,” unfortunately, this tax increase will impact most grain farmers and their succession planning.
Our research shows that this will cost family-run grain farms 30% in increased taxes at the time of succession.
Not only will this cost primary food producers millions of extra dollars, but it also:
01
Targets Farmers Retirement Plans
Today, the average age of Canadian farmers is over 55 years old, and many will be retiring over the next decade. For most, their land and assets are their retirement plan, as they do not have access to pensions or RRSP matching programs like other Canadians.
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This tax increase will introduce uncertainty into farmers' retirement planning by targeting those funds.
02
Increases Cost for Young Farmers
Budget 2024 was titled “Fairness for Every Generation,” but these changes will have the opposite effect on the next generation of farmers who are already facing expensive transfers.
National farmland values appreciated 11.5% in 2023 alone.
With the average cost per acre increasing year-over-year, the next generation is already facing financial hurdles. This tax increase moves the goal posts for the next generation to take over the family farm by hundreds of thousands or even millions of dollars.
03
Prices Out Many Families
A 30% tax increase dramatically increases the cost of farms, pricing out many families. With agriculture land already so expensive, the only ones that will be able to afford to pay millions of extra dollars will either be corporate farms or development companies.
To protect family farms, the government should follow the principles of an intergenerational transfer as laid out in Bill C-208 and allow those transfers to be taxed at the original capital gains inclusion rate.
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