Viewpoints TAXATION changes in Alberta and across Canada continue to cause confusion and stress with farmers. To help make sense of it all, Alberta Seed Guide turned to Rebecca Sanford, CPA, CA, a senior manager and tax specialist with KPMG in Lethbridge. Rebecca works with farmers and their families on taxation matters, including advising them on personal and corporate tax, and estate succession and business planning. Alberta Seed Guide: How has taxation for farmers changed over the past three years? Rebecca Sanford: A lot has changed for farmers over the past three years. Almost every year, the federal government adjusts the personal income tax brackets slightly. When I think of big changes, however, I immediately think of 2015. That year, the Government of Alberta decided to implement a graduated personal tax rate for all Albertans. Before this was introduced, a farmer who reported his/her income as a proprietor or a partner would have a combined federal and provincial tax rate of 39 per cent. In 2017, this income tax rate has increased to 48 per cent. Likewise an increase in personal tax rates on non-eligible dividends paid from a privately owned farm corporation increased from 30.8 per cent in 2015 to 41.2 per cent in 2017. Additionally, Alberta’s farmers have seen an increase in the personal tax they pay when they sell assets like farmland and realize a capital gain on the sale. While the capital gains deduction was increased in 2015 from $813,600 to $1 million, if a farmer owns more than $1 million in farmland, he or she will need to pay tax on the portion of the capital gain that is not sheltered by his/her capital gains deduction. In 2015, a farmer with a capital gain of $304,000 or more could expect to pay federal tax and provincial tax at 20.13 per cent. In 2017, the same $304,000 capital gain would be subject to tax at 24 per cent. This is a 3.87 per cent increase over the past three years. On the corporate side, in 2015 the federal government stated it would decrease the small business tax rates from 11 per cent to nine per cent by 2019. The federal government has worked towards doing this, with a decrease to 10.5 per cent effective Jan. 1, 2016, and further decreases proposed as per Finance’s Oct. 16, 2017 press release (10 per cent effective Jan. 1, 2018, and nine per cent effective Jan. 1, 2019). Additionally, the provincial tax rate for small businesses has been decreased from three per cent to two per cent effective Jan. 1, 2017. This means that farmers are now paying 12.5 per cent on the first $500,000 of income their corporations earn. For farm corporations that earn $500,001 or more, the combined corporate tax rate has increased from 26 per cent in 2015 to 27 per cent in 2017. The association rules, which outline who has to share the $500,000 small business deduction, were also revised to make it harder for related farming corporations to each individually access Rebecca Sanford explains recent taxation changes that affect Alberta farmers. Rebecca Sanford a senior manager and tax specialist with KPMG in Lethbridge. Taxation Stress Builds 68 www.seed.ab.ca | Advancing Seed in Alberta “Alberta’s farmers have seen an increase in the personal tax they pay when they sell assets like farmland and realize a capital gain on the sale.” —Rebecca Sanford