Government Grants and Assistance

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Government grants or subsidies will either be included in income in the year they are received or used to reduce the cost of assets purchased. Listed below are some of the common assistance programs.

Drought Deferral
Farmers farming in a region designated for the year as a “Drought Region” are eligible for special relief if they were forced to sell a significant portion of their breeding herd. The Income Tax Act allows the farmer to defer paying tax on the sale of the herd as a result of drought. The list of regions affected is designated each September by the Minister of Agriculture and Agri-Food Canada.

To qualify for the special provision, a farmer in a designated region must have sold off (and not replaced) at least 15 per cent of the breeding herd. If the farmer meets the conditions, up to 90 per cent of the net sales of the breeding animals are not included in farm income until a later year, when the area is no longer designated as a drought region. There is no specific requirement to replace the breeding herd in the year the deferred income must be reported or in any other year.

This program is designed to allow farmers to protect their farm operation against large declines in their farm margin. It directs government funds to those farmers who experience margin declines in excess of fifteen percent. Farmers must pay an annual fee to be part of this program. Income received from this program is considered business income for tax purposes.

This program is designed to allow farmers to protect their farm operation against small declines in their farm margins. Participants are allowed to make deposits to their AgriInvest account based on a percentage of their allowable net sales and receive matching government funds. The funds can be withdrawn when the farmer wishes to. Contributions to the account are not tax deductible. Government matching funds and investment income earned in the account are not taxed until withdrawn from the account.

Other Government Programs
Other program payments are often made to deal with specific issues in the farm community. Taxation of those amounts depends on the nature of the payment.

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For more information about the content of this document, contact Joel Bokenfohr.
This information published to the web on July 23, 2014.
Last Reviewed/Revised on July 11, 2018.