Farm deferral program

The Livestock Deferral Program

The Government of Canada has announced that it will introduce legislation to extend the existing rules for prescribed drought regions to farmers carrying on a farming business in a prescribed region of flood or excessive moisture.

Eligible farmers who dispose of breeding livestock in a taxation year because of flood or excessive moisture will be permitted to exclude a portion of the sale proceeds from their incomes until the following taxation year. The Livestock Tax Deferral provision offers insight into this.

The Livestock Tax Deferral provision allows farmers who sell part of their breeding herd due to drought or excess moisture and flood conditions in designated regions to defer a portion of sale proceeds to the following year (see definition of breeding herd). Each year, a list of designated regions prescribed as drought and/or excess moisture and flood regions is announced.

How the Provision Works
To defer income, the breeding herd must have been reduced by at least 15 per cent. Thirty per cent of income from net sales can be deferred if the breeding herd has been reduced by at least 15 per cent, but less than 30 per cent. Where the herd has been reduced by 30 per cent or more, 90 per cent of income from net sales can be deferred.

Proceeds from deferred sales are included as income in the next tax year, when they may be at least partially offset by the cost of reacquiring breeding animals. In the case of consecutive years of drought or excess moisture and flood designation, producers may defer sales income to the first year in which the area is no longer designated.

How the Regions are Designated
Drought or excessive moisture and flood regions are designated on the advice of the Minister of Agriculture and Agri-Food Canada to the Minister of Finance. Canada Revenue Agency requires that designated areas have recognized geo-political boundaries (e.g. municipalities or counties) for administrative purposes.

Discussions with industry representatives in 1990 led to a decision that tax deferral would only be requested if impact was significant. "Significant" was defined as forage yields of less than 50 per cent of the long-term average, and an area that is large enough to have an impact on the industry. Impacts on individual municipalities would not result in a designation.

Livestock producers have also indicated a strong preference for designation to take place as early as possible to provide them with the information needed to make fall and winter management decisions.

A preliminary designation can usually be done in September if it appears that the criteria will be met. Since forage yield information is not final until later in the year, preliminary designation is made primarily on the basis of spring moisture and summer rainfall, supplemented with estimates of forage yield. Assessments of areas are reviewed in discussions with federal and provincial staff. Final decisions and any needed adjustments are made when all forage yield information is available, usually in December.

Only drought or excessive moisture and flood-induced impacts are considered in the designation of eligible areas for tax deferral.

The 2013 zones have yet to be determined and will be disclosed on my blog at a later date. I have include the 2012 Alberta zones for reference purposes.

Alberta
Birch Hills County
Clear Hills County
Grande Prairie County No. 1
Mackenzie County
Municipal District of Fairview No. 136
Municipal District of Peace No. 135
Municipal District of Spirit River No. 133
Nothern Lights County
Saddle Hills County.

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Hanging AroundA...

Hanging Around

As our economy has began it's recovery process,  many businesses are going through a succession process or are currently trying to sell. From a purchasers perspective, consideration should be given to the seller's management and staff. Often a new broom approach is used to sweep  everyone clean - but in business,  not everyone should be discarded.  Previous owners and senior management are often asked to stay on as they offer a blend of new and old which can be contentious or cost-effective.

Keeping senior management on is an approach which offers benefits to both the new owner and the person who staying on. For the former, it provides access for a much needed level of experience as the previous owner has a wealth of knowledge on "how to grow the business best". For the Latter, it offers the seller continuous employment, with a tie to the business they created and a significantly reduced level of stress.

Obviously, from a purchaser's perspective growth is always a main focus, and growth is important. Typically, within the first three years after a corporation has been acquired, there is a 30% drop in sales and revenues. Keeping a key  player means a more successful  transition for a buyer.

Having someone around who knows the business well gives the new owner a chance to get their feet wet under the assistance of someone who knows the operations. This can greatly reduce the learning curve. Additionally, a new owner's stress level can be reduced by knowing that the have a great resource person close at hand. They will be also provide a great introduction for the new owner to all customers and suppliers.

Additional intangible benefits include the goodwill that will extend to any other employees who remain. Having the same senior person provides them with continuity and a person they know while they adjust to the new owner.

From the sellers perspective, often the sales agreement requires a down payment, with the remaining balance paid out of future years. The sales agreement may contain clauses that the net payout is tied to client retention or gross sales.  By staying on as an employee, past owners have a greater ability to impact client retention and gross sales to ensure they receive their full balance of their sales agreement. 

In many cases, saying goodbye to a business is extremely hard. Transitioning out of a business for many sellers provides them with the opportunity to adjust to the changes that have occurred.

Given the level of complexities and emotions associated with the sale of a business it is no wonder there often are problems. There needs to be a clear exit plan.  The purchase and sales agreement often defines timelines with two key factors: the previous owners plans for the future  and the purpose for the overlap. Both the new owner and previous owner should place firmly in their mind the goals that need to be accomplished during that time, and they  then they should focus on completing those tas

As a final thought remember that as a purchaser of a business you maybe acquiring future liabilities depending on how the acquisition occurs.  If for example, the purchase is done as a share acquisition, the purchaser is assuming the employees entitlement for vacation pay. That is to say that long standing employees, who have worked their way up to three or four weeks of vacation will still have that entitlement after the acquisition. This entitlement is an added annual cost that needs to be considered. Additionally these same employees would be entitled to a greater severance package on termination. Neither of these are applicable in an instance where there is simply an asset purchase. 

Obviously a purchase of a business is extremely complicated and requires a great deal of thought and planning. To help simplify your acquisition, contact an Accountant at Ascend Financial and discuss the same with your legal counsel. Please note  that this article touches only a few aspect and isn't meant to apply to everyones situation.  

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Changing Technology

There is always a lot of talk about technological changes and their high percentage of failure. However, it is important to note that many of these projects fail not as a result of the project, but because the technology requires the staff to adapt to change. Specifically, technological changes usual meet the most resistance from staff members that have limited computer skills. Therefore, careful consideration should be given by management to the training, time and budget requirements associated with all components of the project.

Management must set techniques for managing the people side of change, a method for reducing resistance to the change in new technology or processes.

Note that every project is different and requires different techniques for managing the people side. Changes to business processes or business applications require significantly different techniques than those required for software upgrades. Changes to the business process usually requires a change in management. This means that a significant part of the project must address not only the training of the new users and of the new technology, but also setting up an ongoing change management program.

Even with this in place, organizations will still have to understand that the benefits of such changes may not be realized until the new process has become routine. This may take some time - considering how long it can take to adapt to simple routine changes, such as taking a new route to work. Imagine the time it could take for radical changes to business processes. Management needs to digest the fact that implementing new processes and technologies is more than rolling out new systems; training  and support are integral.

Organizations need to make time and budget allowance for the change an agreement components. The change management process has three major components:
1) Preparation
This component includes a readiness assessment and strategy development. It also starts with identifying key personal for the change management team. Focus should also be given to which employees will be affected, the nature of the change and the speed at which it will occur (it is useful to identify the staff members who will resist change).

2) Management
This is the largest part of the process. It involves implementing the vision and establishing the necessary training. It will also include a communications and monitoring model.  Communications should be done often to avoid  the FUD factor(fear, uncertainty and doubt).
My experience has been that there will always be staff that will, despite all your effort, resist change. You must monitor the change and control those that resist change as their they will spend great amounts of time and energy combating the process. You must either get them to accept that this is what is happening or remove them.

3) Reinforcement
This is the component where every small success is recognized and is celebrated. As noted above hidden and open resistance needs to be identified. This should be done in a face to face setting to be effective.

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CloudOnIf you a...

CloudOn

If you are like me, one of the things that has always bothered me was the problem associated with starting a document at the office on Word and trying to finish it on my IPad. I was always converting this back and forth between different file formats after emailing it back and forth or using Dropbox.

Well, with the release of CloudOn, Microsoft brings a fully loaded version of Microsoft Office to the IPad, so I can now edit documents on-the-go using all of Office’s features and store the document right in Dropbox.

Now, CloudOn isn’t really a touch-optimized version. It is much more like a screen shared app with a computer running the program elsewhere. Do note that for connection to CloudOn you must have internet access (to CloudOn’s servers). It actually runs quite well despite being designed for a mouse and keyboard. I think if you are planning on preparing long and detailed documents, this might be tiresome, but for short documents or quick edits, it is really useful and eliminates compatibility problems. It also stores all your files in Dropbox allowing for easy access wherever you are.

Best of all, CloudOn is completely free. So you have nothing to lose by giving this a try. Simply go to your app store and search for CloudOn.


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2012 PERSONAL T...

2012 PERSONAL TAX CHANGES

  • The Family Caregiver Tax Credit – Is a 15 per cent non-refundable tax credit on an amount of $2,000 that provides tax relief to caregivers of infirm dependant relatives. This includes, for the first time, infirm spouses, common-law partners, and minor children. Canadians can claim this new, non-refundable tax credit for the first time when filing their 2012 taxes.

  • The Medical Expense Tax Credit – In order to fully recognize the medical and disability-related costs incurred by caregivers, the Harper Government has removed the $10,000 limit on the amount of eligible expenses a caregiver can claim in respect of financially dependent relatives.

  • The First-Time Home Buyers' Tax Credit – Assists first-time home buyers with the costs associated with the purchase of a home, such as legal fees. More than 550,000 Canadians have taken advantage of the First-Time Home Buyers' Tax Credit.

  • The Children's Fitness Tax Credit – Canadian families can claim a 15 per cent non-refundable tax credit on an amount up to $500 for the cost of registering a child in eligible physical activity programs, such as soccer or hockey teams. For the 2011 tax year, over 1.5 million families took advantage of the Children's Fitness Tax Credit.

  • The Hiring Credit for Small Business – Small businesses that meet certain criteria and paid more in Employment Insurance premiums in 2012 over 2011 are eligible for the credit, which puts up to $1,000 back into the accounts of job creators. As of September 30, 2012, over $200 million has been credited to over 500,000 eligible employers.

  • The Children's Arts Tax Credit – Canadian families can claim a 15 per cent non-refundable tax credit on an amount up to $500 for the cost of registering a child in eligible artistic, cultural, or other programs, such as music lessons or tutoring. Over 460,000 families claimed the Children's Arts Tax Credit in the 2011 tax year.

  • The Apprenticeship Job Creation Tax Credit – Provides employers with a tax credit of up to 10 per cent of the eligible wages payable to eligible apprentices. The maximum credit an employer can claim is $2,000 per year for each eligible apprentice. For the 2011 tax year, more than 10,000 employers across Canada used the Apprenticeship Job Creation Tax Credit.

  • The Tradesperson's Tool Deduction – Allows tradespeople to deduct from their income part of the cost of tools purchased throughout the year.

  • The Textbook Tax Credit – In order to better recognize the cost of textbooks, this credit provides increased tax relief to students in addition to the Tuition and Education Tax Credits. Students must first claim their credit on their own returns, but may be able to transfer unused amounts to a parent, grandparent, spouse or common-law partner.

  • The Universal Child Care Benefit (UCCB) – Gives families with young children more choice in child care by providing $100 per month for each child under age six. Canadians received almost $2.7 billion in UCCB payments in 2011.

  • The Tax-Free Savings Account (TFSA) – Allows all Canadians to earn tax-free income through a range of investment products. TFSAs have become increasingly popular, with approximately 8.2 million Canadians having opened an account and roughly 2.5 million Canadians contributing the maximum in 2011. Starting on January 1, 2013, Canadians will be able to contribute $5,500 to their TFSAs annually.

  • The Registered Disability Savings Plan – A long-term savings plan to help Canadians with disabilities and their families save for the future. Since being introduced by the Harper Government in 2008, over 60,000 plans have been opened.

  • The Canada Employment Credit (CEC) – A 15 per cent non-refundable tax credit on an amount of $1,095 in employment income, the CEC was introduced by the Harper Government to recognize employees' work expenses for items such as home computers, uniforms and supplies.

  • The Public Transit Tax Credit – Allows Canadians to claim the full amount they spend on eligible transit passes for the year. In 2011, more than 1.6 million Canadians claimed this credit.

  • The Volunteer Firefighters' Tax Credit – Available to any volunteer firefighter who serves at least 200 hours per year at one or more fire departments in their community. In 2011, more than 37,000 Canadian volunteer firefighters took advantage of this new tax credit.
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