Farm Support Archives - Fulcrum Group - Chartered Professional Accountants

Agri-Invest Update

December 21, 2022

We have become aware that AFSC discovered a glitch in their process where they send batches of financial information to the AgriInvest Administration. This has resulted in thousands of applications submitted from June 2022 being delayed until December.

AFSC has now forwarded the application backlog and these are being keyed in manually by AgriInvest Administration. Warning letters were sent out by AgriInvest Administration on December 5 to farmers for whom they had not yet received 2021 financial information. If you received one of these letters, it is possible that AFSC did receive your information but it is just now being keyed in late by AgriInvest Administration.

A sample of the letter is as follows:

This glitch should not affect farmers who file Form T1163 (sole proprietors and partnerships with individual partners), as this information is filed directly with AgriInvest Administration via CRA when personal taxes were filed.

If you received one of these warning letters:

Call our office if we are your authorized representative with AFSC and we can investigate for you to make sure all is in order
Or call AFSC at 1-877-899-2372 to ensure that they received your financial information and which day it was forwarded to AgriInvest (you will need either your PIN number or AFSC ID number)

AFSC has confirmed that there will be no late filing penalty for applications submitted to AFSC prior to the September 30 deadline, even if not received by AgriInvest Administration until after that date.

For your information – the AgriInvest application process is normally supposed to work as follows:

Financial information is submitted to AFSC in the form of Statement A.
AFSC then forwards all Statement A’s in batches to AgriInvest Administraiton.
Then AgriInvest Administration issues a deposit notice to the farm.
The farm can then make a deposit into their AgriInvest bank account.
The government matches the deposit. This matching deposit is tax-free until withdrawn from the account.

If you have any further questions, please contact our office.

Accelerated Capital Cost Allowance

September 26, 2022

Staff post by Sarah Penner, CPA

Did you know that certain capital expenditures can be completely written off under CRA’s immediate expensing incentive?

What purchases qualify?

All capital cost allowance (CCA) classes qualify with the exception of classes 1 through 6, 14.1, 17, 47, 49, and 51 (these exceptions are generally long-lived assets such as buildings, other structures, parking lots, and intangible assets like goodwill or trademarks). This means that purchases of vehicles and trailers (Class 10) and other equipment (Class 8) can be fully deducted in the year of purchase.

When is this available?

Canadian Controlled Private Corporations: For purchases made after April 18, 2021, and available for use before 2024

Canadian resident individuals and partnerships: For purchases made after Jan 1, 2022 and available for use before 2025 (or available for use before 2024 for partnerships where not all partners are individuals)

Is there a limit?

Up to $1.5 million per year, shared between associated corporations, persons, or partnerships. This limit cannot be carried forward to another year if not used.

How does this help me?

Under the normal rules, the CCA claim was limited to a certain percentage per year which meant that a capital purchase was written off over several years. With the immediate expensing incentive, there are tax planning options available such as offsetting high-income years with capital purchases.

Do I have to use the incentive?

No – CCA is a discretionary deduction, so you can choose to deduct less than the fully allowed amount of CCA. You can still choose to spread out the deduction for your capital purchase over a number of years in order to normalize your net income.

If you have questions about how the immediate expensing incentive will work best with your business scenario, please contact our office.

Prescribed Interest Rate Changes

June 21, 2022

Did you know that CRA will be raising its interest rates as of July 1, 2022? Much like the Bank of Canada and most financial institutions, CRA will be increasing it’s prescribed interest rates this coming year.

After holding interest rates steady for several years and even decreasing rates in the third quarter of 2020, CRA will be increasing most prescribed interest rates in the third quarter of 2022 by 1%.

These changes will apply to amounts owing both to and from CRA. Updated rates can be found in the column to the far right below on various types of balances with CRA:

	First quarter (January to March 2022)	Second quarter (April to June 2022)	Third quarter (July to September 2022)
Charged on overdue taxes, CPP contributions, EI premiums	5%	5%	6%
Paid on corporate taxpayer overpayments	1%	1%	2%
Paid on non-corporate taxpayer overpayments	3%	3%	4%
Used to calculate employee taxable benefits and shareholder loans	1%	1%	2%

For more information, contact our office.

Carbon Tax Rebate Available to Alberta Farmers

March 10, 2022

Officially called the Return of Fuel Charge Proceeds to Farmers Tax Credit, a new carbon tax rebate for Alberta farmers became available as a refundable tax credit beginning in 2021.

Who is eligible?

Corporations, individuals, partnerships, and trusts that:
- Actively engage in either management or day to day activities of earning income from farming
- Have total farming expenses of $25,000 or more
For partnerships, the tax credit is calculated at the partnership level and then each partner calculates their credit entitlement based on their proportionate interest in the partnership.

How much is the tax credit?

2021: $1.47 per $1,000 of eligible farming expenses
2022: $1.73 per $1,000 of eligible farming expenses

What expenses are eligible?

Farming expenses must be attributable to farming in either Alberta, Manitoba, Ontario, or Saskatchewan and must meet or exceed the threshold of $25,000
All expenses deducted in calculating income from farming for tax purposes are eligible, with the exclusion of:
- deductions arising from optional or mandatory inventory adjustments
- transactions with non-arm’s length parties
When a tax year-end does not align with the calendar year-end, eligible farming expenses will be allocated to each calendar year based on the number of days in each calendar year over the total days in the taxation year.

How do I apply?

By filling out Form T2043 (this is part of your personal income tax return, or T1)
Tax credit received will be reported as income in the year of claim

2021 Canada-Alberta Livestock Feed Assistance Initiative

December 28, 2021

If you are a livestock producer with breeding stock and were affected by the drought this past summer, there is some new information about how to apply for Phase 2 of the drought program.

Applications will only be open for a short time: January 5, 2022 – January 31, 2022. Time is limited so get your application in! If you require assistance with your application, please contact our office.

Highlights:

The program is based on extraordinary costs related to the drought which were incurred between June 1 – December 31, 2021
Phase 2 payout will be based on the number of breeding females in inventory on December 31, 2021, up to $200 per animal
The minimum number of animals to apply is 10 eligible animals
The application window is January 5 – 31, 2022 with payments issued after January 31, 2022
Producers do NOT have to have participated in Phase 1 to be eligible for Phase 2
Application is made through AFSC Connect

Program calculation:

The program is calculated based on a feed need model which looks at the following factors:

The normal pasture days you expect compared with pasture days you actually got out of that pasture this past summer. The shortfall of normal days are considered extraordinary feed days.
The number of pounds of feed required (this is a set amount depending on what kind of animal it is).
The cost of feed ($0.115 per pound).

This means 23 extraordinary feed days for bred cows or 27 extraordinary feed days for bred heifers are needed for payment under Phase 2 of the program to start to kick in.

Additional temporary expenses will also be considered and can be submitted for reimbursement at 70% of the cost incurred (proof of expenses not required at time of application but may be requested later).

Additional expenses include things like:

Temporary fencing costs
Feed purchased
Temporary watering costs
Transportation costs to move feed, water, or livestock

For more information, visit the following links or contact our office:

AFSC information regarding Phase 2: https://afsc.ca/income-stabilization/agrirecovery/ – this has some short videos with information that would be good to forward to clients

AFSC frequently asked questions: https://afsc.ca/resources/livestock-feed-assistance-initiative-qas/

2021 Canada-Alberta Livestock Feed Assistance Initiative Terms and Conditions: https://afsc.ca/wp-content/uploads/2021/08/2021-Canada-Alberta-Livestock-Feed-Assistance-Terms-and-Conditions.pdf

How To Create an Effective Budget to Achieve your Financial Goals

November 25, 2021

If you feel like you don’t know where your money is going, don’t save regularly, have trouble paying off debt, or feel like you are not in control of your finances it might be helpful to make a budget. A budget can help you determine how much money you are making, spending, and saving which can help to guide your spending to achieve your financial goals.

The first step in making a budget is determining where you are currently spending your money. The best way to do this is to look at how you are spending in an average month by looking at all your statements (bank statements, credit card statements, and/or line of credit statements). It is useful to organize your purchases into essential and non-essential items. Essential items could include mortgage/rent payments, utilities, phone/internet bills, property taxes, insurance, groceries, fuel, and/or debt payments. Non-essential items would include entertainment, eating out, travel, gifts and other purchases, alcohol, or cosmetics.

This process will allow you to see clearly where you are spending your money and where you may be able to cut back. For example: if you are spending $5 a day on coffee that would add up to $1,825 per year. You could reduce that expense by making coffee at home in the morning to bring with you. The same principle could be applied to eating or drinking out. It may be possible to reduce essential expenses as well by combining your insurance payments for a lower rate or possibly speaking to a financial advisor about consolidating your debt at a lower interest rate.

Once you have a realistic idea of how much money is coming in and going out it is time to create a budget that includes the changes you would like to implement. Start with your income and then deduct from it your essential expenses after you have taken any steps necessary to reduce them, as mentioned above. From there, you can deduct additional payments you may wish to make, such as additional debt repayment or savings. Finally, allocate the remaining money you earn to non-essential expenses.

Each month, you should review your budget to determine if you were successful in sticking to it as planned and whether your budget goals were realistic or need adjusting.

The key to making a successful budget is to review it and update it regularly based on your circumstances. It is important to update your budget with any changes such as an increase in pay or an increase in any bills you incur.

If you would like assistance in setting up an effective budget or have any questions related to budgeting, contact our office.

fulcrum group accountant livestock feed assistance

Update on Livestock Feed Assistance Initiative

September 10, 2021

Farmers are now able to apply online through AFSC Connect for assistance with extraordinary feed costs due to the drought conditions in Alberta during Summer 2021. For those who do not have access to AFSC Connect, other application options can be discussed by contacting the AFSC Client Service Centre at 1-877-899-2372 or a local AFSC branch office.

Initial payment

Mature breeding cattle or bison females are eligible for an initial payment of $94 per head. Other livestock categories, such as horses, elk, sheep, goats, bees, etc. have different payment levels.
Payment is based on the number of eligible livestock owned on August 6, 2021
No expense records need to be submitted for the initial payment
Deadline to apply: October 31, 2021

Secondary payment

This payment covers extraordinary costs exceeding the initial payment
Payment is based on the number of eligible livestock owned on December 31, 2021
Calculation based on the number of extraordinary feed days (normal number of pasture days less number of pasture days the participant was able to follow normal grazing practices in 2021)
Mature breeding cattle or bison females are eligible for a maximum payment of $106 per head. Other livestock categories have different maximum payment levels.
Proof of additional eligible expenses will be required (i.e. feed, temporary water provision, temporary fencing, transportation costs, etc.)
Application not available until later this year

For more information, see AFSC’s news release or frequently asked questions page or contact our office:

(News Release) https://afsc.ca/news/application-for-the-2021-canada-alberta-livestock-feed-assistance-initiative-now-available/

(Frequently Asked Questions) https://afsc.ca/resources/livestock-feed-assistance-initiative-qas/

fulcrum group accountant agrirecovery funding farmers

AgriRecovery Funding for Farmers

August 17, 2021

The Government of Canada has announced additional AgriRecovery funding to aid farmers affected by extreme weather conditions. Details are minimal at this point, but the following initiatives are in the works:

Livestock producers may be eligible for up to $200 per breeding female to assist with added costs of obtaining feed and water for livestock. More information here: https://afsc.ca/news/support-on-the-way-for-livestock-producers/
Farmers can apply for an interim payment under the AgriStability program for the 2021 year. Interim benefit payments for 2021 have been increased from 50% to 75% in order to access a larger portion of the benefit sooner.
Livestock tax deferral prescribed drought regions have been released. This program allows beef producers to defer livestock sales forced by drought conditions in order to offset costs to replace the herd in a later period. Designated drought regions can be seen here: https://agriculture.canada.ca/en/agriculture-and-environment/drought-watch-and-agroclimate/livestock-tax-deferral-provision/2021-list-prescribed-regions

Details regarding the Government of Canada’s funding announcement can be found here: https://www.canada.ca/en/agriculture-agri-food/news/2021/08/government-of-canada-increases-total-agrirecovery-funding-to-up-to-500-million-to-support-farmers-facing-extreme-weather.html

As more details are released, we will provide updated information.

For more information or assistance, please contact our office.

fulcrum group accountant agristability reference margin

AgriStability Change retroactive to 2020 program year – Removal of Reference Margin Limit

July 12, 2021

This change impacts the 2020 to 2022 AgriStability program years and could increase the overall amount that AgriStability pays out nationally by around $95 million. This will also help to simplify the program and will increase support for farmers that traditionally have lower allowable expenses.

The agriculture sectors most likely to be impacted by these changes include:

livestock producers that produce their own feed
organic and commercial crop and forage crop producers
beekeepers
mixed farmers.

Reference Margin Limiting – How It Works
Average allowable income	1,000,000
Average allowable expenses	400,000
Reference margin	600,000
Adjusted reference margin (70%)	420,000
Reference margin limit (average expenses for three years)	400,000

Under the old method, the applied reference margin was the lower of the adjusted reference margin ($420,000) and the reference margin limit ($400,000). So in the example above, the program year margin would need to fall below $400,000 to trigger a payout.

With the removal of reference margin limiting, the program year margin would need to fall below $420,000 to trigger a payout.

For more information, visit the AFSC website here: https://afsc.ca/news/agristability-sees-significant-change-with-the-removal-of-the-reference-margin-limit/

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