Increase in Capital Gains Inclusion Rate to Hit Family Farms Hard: GGC

The federal government’s planned new capital gains inclusion rate changes will hit family farms hard, new research by the Grain Growers of Canada (GGC) shows. 

In a release Tuesday, GGC said an average grain farm in Canada - most of which are family owned and operated - will see a tax increase of 30% due to the two-thirds capital gains inclusion rate, which takes effect June 25. 

That means an 800-acre farm purchased in 1996 in Ontario would incur nearly $1.2 million in additional taxes if sold today, while a 4,000-acre farm in Saskatchewan would face an increase of just over $900,000, the release said. 

“This hike targets farmers’ retirement plans, complicates intergenerational transfers, and threatens the long-term viability of family farms across the country,” said Kyle Larkin, Executive Director of GGC. 

The GGC drew its conclusions after weeks of research and consultation with farm tax accountants, it said. 

With over 40% of Canadian farmers nearing retirement over the next decade, the tax increase also introduces “substantial uncertainty” into their retirement planning, the GGC added. 

The increase in the inclusion rate — from one-half to two-thirds on capital gains above $250,000 for individuals — was announced in the federal budget back in April. 

To protect family farms, GGC said it is asking Ottawa to exempt intergenerational transfers and allow them to be taxed at the original capital gains inclusion rate. 

“This will ensure that farmers’ retirement plans remain secure, and that the next generation can afford to take over, enabling family farms to continue being the backbone of Canada’s agriculture sector,” Larkin said. 

The GGC release said there is a common saying that farmers are “cash poor, asset rich,” noting that producers regularly invest in their operations, by expanding their acreage, upgrading grain bins, and purchasing the newest and most innovative equipment. 

Larkin said a 30% increase in taxes on the family farm would serve to dramatically increase the cost of farms, pricing out many families and leaving corporate farms or development companies as the ones able to pay up.  

Canada is already experiencing a decline in family-owned farms, with a 2% decrease between 2016 and 2021, according to the most recent data from Statistics Canada.