Farmers face unintended consequences of new federal housing tax

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by Crispin Colvin, Vice President
Ontario Federation of Agriculture

Canada is in the midst of a housing crisis, and different levels of government are introducing various measures to try to ease the pressure. For the federal government, one of those measures is the Underused Housing Tax Act that became law last year.

It is a one percent tax on the value of vacant or underused housing, and the new federal legislation requires that individuals who aren’t Canadian citizens or permanent residents, as well as private corporations and partnerships – which includes farms – who own residential housing must file an Underused Housing Tax return even if they don’t have to pay any tax.

The legislation was designed to address urban homes, condominiums and apartments that have been purchased for investment purposes, often by foreign buyers, and are now unused or not used to their full extent. Farmers don’t play a meaningful role in Canada’s rental housing market, but they’re now forced to deal with the unintended consequences of these new rules.

That’s because many farmers do in fact own more than one residence, but not because they’re keen to be landlords or residential investors. Rather, their interest lies in the land, and they’ve bought additional farmland over the years to expand their business or, for example, make it possible for a son or daughter to become part of the farm.

Much of that farmland often includes a farmhouse and as those older, smaller farms are absorbed into larger ones, farmers inadvertently become the owners of multiple residences. And regardless of whether those homes are subject to the new tax or not, the new legislation requires that farmers must now file a return under the Underused Housing Tax Act.

A separate return has to be filed every year by April 30 for each property a farm corporation owns, and if that return isn’t filed, the penalties are substantial – up to $10,000 or more.

As farmers, we are in the business of farming, not real estate, and although most of us are exempt from paying the actual tax, many may still be unaware of the new legislation, its requirements, and its penalties. The paperwork is onerous and time consuming, and the information available on government websites is not terribly detailed or easy to understand.

That’s why the Ontario Federation of Agriculture (OFA), along with the Canadian Federation of Agriculture and other farm organizations, has been actively advocating for the federal government to exempt farmers from having to file an Underused Housing Tax return.

We’ve been raising awareness and meeting with elected officials and government staff to explain the issue of multiple dwellings in rural areas when farmers buy farmland, and the unintended consequences this legislation now has for the farming community.

Late last month, the federal government announced it is delaying any fees or penalties until October 31, giving affected property owners an extra six months to file their first return under the new act. Although this is a welcome reprieve to give us more time to make sense of the legislation, it doesn’t address the greater long-term impact and burden it places on farm businesses.

Farmers are caught in the middle of governments trying to find housing solutions and the unique realities of farm businesses who unintentionally find themselves with multiple dwellings through the purchase of additional farmland.

OFA and our partner organizations will continue to advocate strongly for a filing exemption for farmers, but while we do, we encourage all farmers to make sure they file their Underused Housing Tax return in order to avoid the substantial penalties, and to contact their accountants with any questions.

There are also resources available on the OFA website, including a webinar we hosted last month in partnership with BDO to give background and answer questions on the issue.

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