20 / 48
Fall
2017
Grains
West
20
THE
FARMGATE
BY LEE HART
LEVELLINGROLLERCOASTER INCOMES
DEFERREDCASHTICKETS SMOOTH INCOMEUPS ANDDOWNS
AWC CHAIRMAN KEVIN AUCH SAID
2016 was just the sort of year in which
deferring income from one crop year to
another made sense.
Auch, who farms at Carmangay, north
of Lethbridge, doesn’t expect he’ll need to
defer income from the 2017 crop he began
harvesting in early August. After a dry
growing season, wheat yields were about
50 per cent below average. He carried over
deferred income from an above-average
yield in 2016 to level his income over the
two crop years.
This levelling-out mechanism is an
important risk- and tax-management tool
farmers hope to preserve. However, the
federal finance department announced
in early 2017 it was considering scrapping
the deferred cash ticket program.
“I am sure it is something the vast ma-
jority of farmers use on a regular basis,”
said Auch. “For our farm, we probably use
it every couple of years. It is a very impor-
tant management tool. On any given year,
you don’t know what your production will
be like, so it helps take those peaks and
valleys out of your income—more specifi-
cally, the income tax you pay.”
“We are not sure why the government is
looking at eliminating the program,” said
AWC general manager Tom Steve. “In our
investigations, it doesn’t appear to be a po-
litical decision. Perhaps at the bureaucrat-
ic level someone thought, since there is no
longer a Canadian Wheat Board, farmers
didn’t need the program. But it is still
something very much used by producers.”
EASIER TO MANAGE MONEY
Auch said with all the uncertainties
involved in agricultural production, the
deferred cash ticket takes some of the
money management pressure off.
“In a good crop year, a person might
have $100,000 in income, and the next
year, if the weather turns against you,
your income could be zero,” he said.
“With the deferred cash tickets, you can
transfer income from the good year to
the following year. So rather than pay a
big tax bill one year, and then claim it
back the next in the poor crop year, you
level your income out and pay taxes on
$50,000 in each of the two years. It’s not
about trying to avoid income tax, it’s about
just spreading it out over two years. It just
makes things easier to manage.”
Stuart Person, director of primary
producer agriculture for MNP, said the
vast majority of grain producers the ac-
counting, tax and business consulting firm
works with use the system. “The imme-
diate impact that would result from going
through a transition would be staggering
and have serious financial consequences
for some farm families,” he said.
Auch agrees it’s unclear what benefit
the program’s cancellation would have.
“If the government thinks it might save
money or increase tax revenue, I believe
cancelling the program would have the
opposite effect.”
He said if the program isn’t available,
farmers likely won’t deliver and sell as
much of their crops in high-yield years,
opting to leave a portion in storage. If a
grain company has a market for a specif-
ic product, but can’t acquire it because
farmers don’t want to sell, they could miss
out on a sale, and the government would
subsequently miss out on collecting income
tax revenue. “There would be some real
negative impacts to the finance department
in cancelling the program,” said Auch.
The AWC and other agriculture and
commodity associations have discussed
the ramifications of its cancellation with
the federal finance department, which has
yet to make a final decision.
“I’m hoping over the coming months
we have another opportunity to explain
to officials this program is important to
farmers and cancelling it would have a
negative impact,” concluded Auch.