Three tax filing changes farmers should know about

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by Clint Cameron, OFA

Tax season is coming up and while it’s always important to stay on top of deadlines and new rules, there are changes to three specific federal tax filing requirements that farmers should pay particular attention to for 2024.

Underused Housing Tax:

In 2022, the federal Underused Housing Tax (UHT) Act became law, putting a tax on the value of vacant and underused housing owned either directly or indirectly by people who aren’t Canadian citizens or permanent residents. For the farming sector, the UHT’s onerous annual filing requirements and steep penalties for non-compliance, which ranged from $5,000 to $10,000, were a major concern. Following advocacy from the Ontario Federation of Agriculture and other organizations, the federal government announced the following proposed changes in its 2023 Fall Economic statement:

  • Exemption for farmers: farm businesses will be exempt from filing the UHT for the 2023 tax year and beyond as long as more than 90% of ownership is by Canadian citizens or permanent residents.
  • Lower penalties: minimum penalties for failing to file a UHT return were lowered to $1,000 for individuals and $2,000 for corporations for each UHT return not submitted. The proposed changes, which would apply for the 2023 tax year and beyond, still need to be introduced and passed through legislation in order to come into effect. Key takeaway for farmers: UHT still applies for the 2022 tax year, so any farmers who were required to file a UHT return for 2022 but have not yet done so, should file by April 30, 2024 to avoid penalties and interest.

T3 reporting rules for federal trusts:

The federal government has introduced new reporting requirements for trusts, including those used in farm business and estate planning, that will take effect for taxation years ending after December 30, 2023. Annual filing: Although there are some exemptions, most Canadian trusts must now file an annual T3 return even if the trust didn’t dispose of capital property or owe any tax during the year.

More information: those filing a T3 will need to provide much more information than in the past, including names, addresses, birth dates, jurisdiction of residence and taxpayer identification numbers of anyone involved with a trust (trustees, beneficiaries, settlers or influencers of trust decisions). Non-compliance penalties: the filing deadline for 2023 T3 returns is April 2, 2024. Penalties start at $25 per day for each day the return is late, with a minimum penalty of $100 and a maximum of $2,500. In more severe cases, penalties could be $2,500 or 5% of the highest fair market value of the assets held by the trust during the year.

Key takeaway for farmers: Farm businesses who use family trusts to hold private company shares, such as a farm corporation, as well as trusts used for estate planning or holding personal-use assets must now file an annual T3 return. Not sure if these rules apply to your farm? Consult a professional who is knowledgeable in farm trusts; filing unnecessarily can complicate estate planning and impose unintended legal and financial challenges.

Electronic filing for HST returns becomes mandatory:

The Canada Revenue Agency (CRA) has implemented new electronic filing requirements for GST/HST returns starting in 2024 for anyone with a GST or HST number, with the exception of charities and a few listed financial institutions. For CRA purposes, electronic filing options include:

  • GST/HST NETFILE: a direct online submission to the CRA.
  • My Business Account: A secure CRA portal for various business tax accounts.
  • Represent a Client: A service for accountants to file a return on behalf of their clients.
  • Electronic Data Interchange (EDI): Electronic payment of net tax through Canadian financial institutions.
  • GST/HST TELEFILE: A telephone-based filing system using a touchtone phone.
  • GST/HST Internet File Transfer: Submission through third-party accounting software.

Key takeaway for farmers: for those without access to a computer or a reliable Internet connection, filing by phone using GST/HST TELEFILE is a valid electronic filing option.

It can be a bit overwhelming to keep on top of the evolving tax landscape, so OFA has put together an easy-to-follow fact sheet that summarizes these key changes and where to go for more information. It’s downloadable on the OFA website.

In addition to farming and running a business that offers services to farmers, I have also spent a large part of my career in the corporate world. So I’m no stranger to the paperwork that comes with being in business. Here are a few tips to make things easier at tax time. Keep good financial records and make sure that those records and your books are up to date. Look for updates on changes from the OFA, accounting firms, financial institutions and others. Consult professionals like accountants, tax specialists, financial advisors or estate planners to help you to navigate any new requirements and ensure you’re compliant.

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