Tax Relief for Ranchers Affected by Bovine Tuberculosis

Backgrounder

The Government has announced further tax relief for taxpayers who receive compensation under the Health of Animals Act due to the 2016 and 2017 bovine tuberculosis (TB) outbreak in Alberta and Saskatchewan that forced the destruction of livestock.

Current income tax rules provide a tax deferral that allows a taxpayer to defer paying tax on the amount received in a tax year as compensation for the forced destruction of livestock from the current tax year to the following tax year.

The objective of the deferral is to allow farmers who would otherwise realize a large income inclusion in the year they receive compensation to have the option to defer the income inclusion to the following year, when that income inclusion may be partially, or fully, offset by the cost of acquiring new livestock.

The Government recognizes that taxpayers affected by bovine TB may be unable to fully replenish their herds within a year and that replacement purchases are expected to extend over several years.

Accordingly, the Government intends to extend the existing tax deferral to better correspond to the repopulation plans and replacement purchases schedule, as determined in consultation with the industry.

As a result, taxpayers who received amounts as compensation in 2016 or 2017 under the Health of Animals Act as a consequence of the forced destruction of their livestock because of the bovine TB outbreak will effectively have the option of including those amounts in income for tax purposes, as follows:

  • 2016 and 2017 tax year: no amount of compensation received will be included in income
  • 2018 tax year: 83 per cent of compensation received will be included in income
  • 2019 tax year: 11 per cent of compensation received will be included in income; and
  • 2020 tax year: six per cent of compensation received will be included in income

Livestock Tax Deferral Provisions – Designated Areas Eligible for 2017

The Government today released its list of designated regions in British Columbia, Alberta, Saskatchewan and Quebec in which the livestock tax deferral has been authorized for 2017 due to drought, flood or excess moisture.

The livestock tax deferral provisions allow livestock producers in prescribed drought, flood or excess moisture regions to defer a portion of their 2017 sale proceeds of breeding livestock until 2018 to help replenish the herd. The cost of replacing the animals in 2018 will offset the deferred income, thereby reducing the tax burden associated with the original sale.

Eligibility for the tax deferral is limited to those producers located inside the designated prescribed areas. Producers can request the tax deferral when filing their 2017 income tax returns.

2017 Livestock Tax Deferral—Initial List of Designated Regions

Current Tax Treatment Maintained for Deferred Cash Purchase Tickets

When a farmer delivers a listed grain (such as, wheat, oats, barley, rye, flaxseed, rapeseed or canola) to the operator of a licensed elevator, the operator may issue a cash purchase ticket or other prescribed form of payment to the farmer. If the cash purchase ticket in respect of a delivery of a listed grain is payable in the year following the year in which the grain is delivered (a “deferred cash purchase ticket”), the taxpayer includes the amount of the ticket in income in that following year.

Budget 2017 launched a consultation on the ongoing use, and potential elimination, of the income tax deferral available in respect of cash purchase tickets for deliveries of listed grains.  The Government has carefully considered all the submissions received during the consultation, and will maintain the current tax treatment of deferred cash purchase tickets such that, if a cash purchase ticket in respect of a delivery of a listed grain is payable in the year following the year in which the grain is delivered, the taxpayer will continue to include the amount of the ticket in income for that following year.

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Additional Tax Support for Canadian Farmers

Contacts

Guy Gallant
Director of Communications
Office of the Honourable Lawrence MacAulay
613-773-1059

Media Relations
Agriculture and Agri-Food Canada
Ottawa, Ontario
613-773-7972
1-866-345-7972
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