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SC Concerned About Proposed Changes To The Income Tax Act

Published: April 1, 2013 3:38 pm ET

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On March 21, 2013, the federal budget was released, containing proposed changes to Section 31 of the Income Tax Act. This Section of the Act outlines the circumstances where a farmer may deduct up to $8,750 of losses against his/her non-farm income.

As previously reported, the government has proposed to increase this limit to $17,500, whereby a farmer can deduct his/her first $2,500 of losses and 50% of the next $30,000. Although this very modest increase will benefit some of our members, overall Standardbred Canada believes that the proposed change will be detrimental to our industry.

Standardbred Canada has been working on this issue for many years. Over the last 18 months, we have been working with the Canadian Federation of Agriculture to have discussions with government regarding the importance of making meaningful change to Section 31 for the benefit of farmers. We support the position of the CFA, which is to reinforce the importance of the decision made by the Supreme Court of Canada (Canada vs. Craig, 08-01-2012), and to recommend that the loss restriction be increased to a more realistic $40,000. These two changes are critical to an industry that requires significant capital investment.

It would appear that the government is changing the tax law to nullify the Supreme Court of Canada and eliminate the decision of Canada vs. Craig. That judgment clarified that a taxpayer could deduct all of his/her losses against off-farm income if the specifics of the combination test were met. Now, under the current proposal, it would appear that farmers will be limited to a deduction of $17,500 - an increase that is less than inflation. At a time where our industry needs to maintain investment and attract new owners, this proposed tax change may pose a serious challenge to those looking to enter or stay in the industry.

Standardbred Canada encourages the government to engage in discussions with CFA to implement meaningful changes to the Tax Code that will encourage growth and investment in rural Canada.

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