Allowable Income and Expenses
Allowable income and expenses are those directly related to producing and selling agriculture commodities.
Individuals (sole proprietors) must provide the income and expense information on the T1163 and T1164 forms and submit them to the Canada Revenue Agency (CRA). This information is then forwarded to SCIC for the AgriStability Program. SCIC also accepts individual producers’ income and expense information through AgConnect.
Corporations, co-operatives and other entities are to submit all their income and expense information directly to SCIC using AgConnect or the Corporations, Co-operatives and Other Entities form.
The additional information used to adjust a producer’s program margin is called supplemental information. This information includes changes in a producer’s inventory, accounts payable, accounts receivable, purchased inputs and deferrals. AgriStability adjusts program margins using supplemental information to ensure the program margin represents the overall financial view of the farming operation. For all types of farming operations, supplemental information is submitted directly to SCIC through AgConnect or on the appropriate form:
- For individuals (sole proprietors) – Supplemental Information form;
- For corporations, co-operatives, other entities – Corporations/Co-operatives/Other Entities form.
From time to time, a farming operation’s size may change. This could include expanding acres, reducing acres, growing something new, reducing herd sizes, etc. This type of change is called structural change.
When this occurs, the farming operation’s income and expenses will be different than what occurred in the past. As a result, the farm’s historical reference margin is no longer a good comparison for the current program margin.
To provide a more accurate comparison, AgriStability adjusts the farming operation’s reference margin to reflect the farm size and type in the program year.
Calculating Structural Change
Each year SCIC reviews your file to determine whether a structural change adjustment is necessary. For each year in your reference margin, an adjustment is made based on the farming operation’s current productive units. This calculation ensures your historical reference margin is an accurate reflection of what the margin would have been, had the operation remained the same size and scale as in the program year. If the structural change represents $5,000 and at least a 10 per cent difference in your margin, it will be subject to structural change adjustments.
SCIC encourages producers to indicate if their operations should be combined. SCIC will also combine operations where it is determined the entities are a part of a whole farm, even if reporting separately for income tax purposes. SCIC considers the following criteria when entities should be combing operations:
- the operations are not legally, financially or operationally independent; or
- all or some of the transactions between the operations are above or below fair market value.
By combining operations that are not independent of each other, SCIC ensures AgriStability benefits are directed to producers that have experienced a decline in their program margin beyond their control.