Question Period Note: INTERGENERATIONAL FARM TRANSFER

Q1 – Why won’t the government get rid of the capital gains tax increases to help farmers with intergenerational farm transfers? Q2 – The Grain Growers of Canada estimate that the changes to capital gains tax will increase taxes by 30 per cent on family-run grain farms, making it much harder for families to pass down farms. Why is the government making it harder for grain farmers to pass their farm to the next generation?

R.1 - The capital gains tax changes announced in Budget 2024 will help many small to medium sized farm operators pay less in capital gains when selling their farms. This will particularly benefit them after the Canadian Entrepreneurs’ Incentive is fully rolled out in 2029. R.2 - Our Government is committed to tax fairness. Many small to medium sized farm operators will benefit from the proposed changes to the capital gains tax. That is how we are supporting farmers while ensuring a fair tax system in this country.

The Minister of Agriculture and Agri-Food’s mandate letter contained a commitment to “work with the Minister of Finance and farmers on tax measures to facilitate the intergenerational transfer of farms”.

Bill C-208 was introduced in 2021 to help farming families wishing to pass their farm to the next generation. The bill provided tax relief to families by allowing the transfer of family farms to children or grandchildren to be treated similarly to sales to unrelated parties. This change addressed the previous penalty where such transfers were taxed at higher dividend rates rather than the lower capital gains rates.

Several provisions under the Income Tax Act provide support for intergenerational farm transfers:

Lifetime Capital Gains exemption, which allows an individual selling a qualified property to use their capital gains to reduce their taxable income;

Rollover provision, which allows an individual to transfer the title of an asset on a tax-deferred basis; and

Reserve provision, which allows the proceeds from the sale of property to be claimed by the seller over up to five years.

There are also a number of federal non-tax measures available to facilitate farm transfers:

Loan guarantees for farm transfers and to beginning farmers are available under the Canadian Agricultural Loans Act Program;

Farm Credit Canada (FCC) offers free learning programs regarding succession planning and targeted loan products to facilitate farm transitions.

Through agricultural policy frameworks, the Government has been – and will continue to be – committed to working with provincial and territorial counterparts to ensure the next generation of farmers is equipped for success. This collaboration has resulted in guides, workshops and/or financial support for succession planning which are available to farmers through provincial programming. Examples include:

The Government of Newfoundland and Labrador’s Agriculture Business Program;

The Government of Saskatchewan’s Farm Business Development Initiative; and

The Government of Ontario’s Farm Succession Planning Guide.

Young farmers are the future of Canada’s agriculture sector. This Government is committed to seeing farm families succeed and will continue to work with producers to facilitate the intergenerational transfer of farm businesses.

Our Government has already made amendments to the Income Tax Act that make it easier for farming families to pass their farm to the next generation.

There are several other provisions under the Income Tax Act that support intergenerational farm transfers, including the higher Lifetime Capital Gains Exemption announced in Budget 2024.