Year End 2021 Agriculture Matters
Poultry and Egg On-Farm Investment Program (PEFIP)
PEFIP is a 10 year program to support on-farm investments in:
- increasing efficiency or productivity
- improving on-farm food safety and biosecurity
- improving environmental sustainability
- responding to consumer preferences (improving animal welfare, adopting alternative housing systems, transitioning to organic production, etc.)
Producers who held quota on January 1, 2021 must register with the program prior to submitting a project application. The registration process is to validate your license information and confirm your maximum funding.
Applicants may apply for eligible activities that started on or after March 19, 2019 and costs that were incurred on or after March 19, 2019. Applicants may submit more than one Project Application prior to the program end date of March 31, 2031 providing the applicant does not exceed their maximum funding.
For assistance with registration or submitting a project application please contact your Accountant. The
Agriculture Canada applicant guide can be viewed online.
Employing Temporary Foreign Workers
The agriculture and agri-food sectors employ over 2.1 million Canadians, or one in nine jobs in the Canadian economy. Between increased production targets and a rising number of retirements, labour shortages are expected and in order to mitigate this, many have looked to foreign labour to help fill the gap. In 2020, more than one in six people employed in Canada’s agriculture sector were foreign workers.
Hiring a temporary foreign worker is a complex process that requires expertise in order to complete accurately and Ward & Uptigrove is able to connect you with legal advice in order to ensure that your temporary foreign worker application meets all of the requirements and is successfully approved.
Once Temporary Foreign or Migrant Farm Workers have been hired, there is an additional responsibility to ensure the safety of these vulnerable workers. They may have:
- Limited English and literacy skills that affect their ability to understand safety information.
- Societal and cultural differences influencing their behavior i.e. they may be apprehensive to speak up and anxious about keeping their job.
When employing Migrant Farm Workers some best practices are to:
- Use symbols, images, and pictures on signs and instructions whenever possible to eliminate confusion and overcome language barriers.
- Provide health and safety information in the workers’ first language if possible. The Ontario Ministry of Labour offers some publications in a variety of languages:
- Ask workers that have a better understanding of English to help with translations and communication.
For more information, please see Occupational Health Clinics for Ontario Workers' Migrant Farm Worker Program and Communicating Health & Safety Effectively For Employers of (Migrant) Farm Workers.
If you are interested in accessing additional information, training and tools needed to efficiently and successfully hire and manage foreign workers, you can contact Canadian Agricultural Human Resource Council or subscribe to their Toolkit.
Additional Resources:
ASPE Section 3041
Accounting for biological assets and harvested products of biological assets
In 2019, the Accounting Standards Board released Section 3041 – Agriculture to provide authoritative guidance on accounting for biological assets and harvested products of biological assets by agricultural producers. The purpose of this new section is to provide more consistent reporting for agricultural producers who prepare their financial statements in accordance with the Accounting Standards for Private Enterprise (ASPE).
This section is effective for fiscal periods beginning on or after January 1, 2022.
What is a biological asset?
A biological asset is a living plant or animal. Biological assets are either productive biological assets or agricultural inventories. It is important to classify biological assets in each category as each category is valued differently.
Productive biological assets are:
- Held for use in the production or supply of agricultural inventories or other productive biological assets (e.g breeding livestock)
- Acquired or developed for use on a continuing basis with other than short productive lives (i.e. longer than one year) and
- Not intended for sale in the ordinary course of business
Agricultural inventories are biological assets, or the harvested products of biological assets that are:
- Held for sale in the ordinary course of business
- In the process of agricultural production to be held for sale or for use in a productive capacity or
- Held for use in a productive capacity with short productive lives e.g. harvested grains, young livestock, poultry
How will our financial statements change?
A distinction between biological assets and agricultural inventories must be made. Agricultural inventories can be measured at their cost or net realizable value. The measurement of these types of assets should not change from prior years.
Productive biological assets must now be initially measured at cost and are subsequently amortized over their useful lives. Productive biological assets will now be treated similar to other capital assets. These assets will be recorded as long-term assets as opposed to being recorded as inventory and a current asset.
Productive biological assets are amortized to income over their estimated useful lives unless an agricultural producer manages a group of productive biological assets on a collective basis to indefinitely maintain the groups collective productive capacity, then the group is assumed to have an indefinite useful life and is not subject to amortization (E.g. breeding livestock). Therefore, the value of productive biological assets will not change on the financial statements unless impairment has occurred or a significant change to the breeding livestock has been made.
Your financial statements for the period after this is inacted will include additional disclosure requirements. There are also transitional provisions that will be considered for each client to reduce the administrative time in applying these new reporting standards. The change in recording productive biological assets from current to long-term assets may have an effect on your financial covenants. Your Accountant will review these effects with you during the preparation of that year end financial statements. If you have any concerns before that, please reach out to your Accountant.
Tax Planning
Each year, near the end of November and into December you should review if your taxable income will be higher than normal for 2021. For this year, one important item would be if you received any funding from COVID support programs like CEWS, CERS, or the CEBA loan. Although the CEBA loan does not need to be repaid until December 31, 2022, the government forgivable portion is taxed in the year you received the loan.
Please review the options below which could be used to minimize your tax liability:
- Prepaid Expenses - If you have the funds available, an effective way to defer taxes is to prepay for 2022 expenses prior to December 31st. Examples of common prepayments are for crop inputs and livestock feed.
- Asset purchases - If you were holding off an asset purchase until 2022, you might consider purchasing the asset before December 31st to take advantage of the Accelerated Capital Cost Allowance (CCA) rates. As long as the asset is purchased and “available for use” prior to the end of the year, you will be entitled to the first year enhanced CCA rate that is equal to three times the normal first year rates (half year rule still applies). For example, if you purchase a tractor for $30,000 with a CCA rate of 30% before the end of the year, you would be entitled to a CCA deduction of $13,500 ($30,000 x 30% X 50% x 3) in the tax year.
- Payables – Pay invoices in 2021 rather than waiting until 2022. Paying as many expenses as possible before year-end will result in more deductible expenses for 2021 and will reduce your taxable income for the current year.
- Holding inventory - Delay the sale of inventory (crops, livestock) until 2022. If you were planning on selling some inventory (crops, livestock) before year end but you do not need the cash flow until after year end, this can also be an effective method to defer taxes.
- Immediate expensing of asset purchases - If you are incorporated, you could have the ability to immediately expense the entire cost of eligible capital property in the year you purchase the asset(excludes buildings, quota, concrete work). The Government has not passed this into law yet, but we are hopeful that this will pass soon. The limit for immediate expensing is up to $1.5 million per associated group.
It is important to note that the options above act as a tax deferral, meaning, you are reducing taxes in the current year, but you should expect to pay the taxes at some point in subsequent years.
If you need assistance with tax planning this year, please reach out to your Accountant to go over the options that works best for you.
Deadlines
Reminders of upcoming deadlines for AgriStability and AgriInvest
AgriStability: Deadlines for 2021 program year
- April 30, 2021: Pay fee, submit New Participant Form or cancel coverage
- December 31, 2021: Apply for interim payment
- December 31, 2021: Pay fee – final deadline (20 per cent increase)
- June 15, 2022: Submit T1163 (individuals)
- June 30, 2022: Submit Statement A (corporations, trusts and special individuals)
- June 30, 2022: Submit Year-end report and Claim form
- December 31, 2022: Final deadline – Report your 2020 farm income to Canada Revenue Agency
AgriInvest (2020 listed. Dates will be the same for 2021)
Deadlines for 2020 program year
- June 15, 2021: For individual participation in AgriStability and AgriInvest, submit 2020 tax forms to Canada Revenue Agency
- June 30, 2021: For corporation, trust and special individuals participation in AgriStability and AgriInvest, submit 2020 tax forms to Agricorp.
- September 30, 2021: For participation only in AgriInvest, submit 2020 Statement A to Agricorp and 2020 T1163 to Canada Revenue Agency
