Alberta Grains’ Farmers Voice Concerns Over Capital Gains Inclusion Rate Increase

Alberta Grains is calling on government to allow all eligible intergenerational farm transfers to be taxed at the original capital gains inclusion rate.

As part of Budget 2024, legislation tabled on June 10, 2024, proposes changes to the capital gains inclusion rate which will see it jump from 50 per cent to nearly 67 per cent in some instances.

For individuals, the higher rate applies only to capital gains above $250,000, with the first $250,000 taxed at the original 50 per cent rate. Corporations and trusts, which encompass many family farms, will see all capital gains taxed at the increased rate. Despite an increase in the Lifetime Capital Gains Exemption (LCGE) to $1.25 million for qualifying farm operations, the higher inclusion rate effectively nullifies this benefit.

Over 95 per cent of Canadian farms are family-owned and operated. The proposed changes threaten the financial stability of these farms, especially as many prepare for succession planning and to transfer farming assets to their children.

“Farming is a capital-intensive business,” said Shannon Sereda, Alberta Grains Director of Government Relations, Policy & Markets. “Farmers make significant investments early in their careers and look to withdraw the equity from these investments upon retirement. The new inclusion rate adds significant barriers to both retirement and succession planning.”

With over 40 per cent of Canadian farmers expected to retire in the next decade, Alberta Grains, alongside other farm groups, has long advocated for tax rules that facilitate these transitions. For instance, Bill C – 208, introduced amendments in Budget 2023 to help ease provisions associated with intergenerational farm transfers, changes to the inclusion rate will hinder the intent of those amendments.

“If Canada wants to maintain a thriving agricultural sector, it must exempt intergenerational farm transfers from this tax increase,” added Tara Sawyer, Alberta Grains Chair. “These changes are a barrier for young farmers carrying on the family business and for new farmers entering the industry. Alberta Grains remains committed to supporting family farms and advocating for policies that promote a sustainable and prosperous future for Albertan farmers.”

Alberta Grains encourages farmers to participate in the Grain Growers of Canada’s ‘Protect Family Farms’ campaign. Farmers can ensure their concerns are heard by their local elected officials by visiting Protect Family Farms and sending a letter to their MP.