New
Farm Property Owners & Property Taxes: What You Need to Know
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Table of Contents
- Policy
- What you need from the vendor
- Next Steps
- What if MPAC re-classifies your new property?
- Applying for reduced rate for the future
- What is a gross farm income start-up exemption?
- Further information
Policy
Under the Assessment Act regulation that came into effect
in January 1998, eligible farmlands can be classed in the Farm Property
Class and taxed at 25 per cent of the municipal residential rate.
Eligibility criteria for this class are:
- The property must be assessed and valued as farmland. This is
determined by the Municipal Property Assessment Corporation (MPAC).
- The property must be used as part of a farming operation generating
Gross Farm Income (GFI) of at least $7,000 as reported to Canada
Revenue Agency for income tax purposes.
- If the GFI is less than $7,000, you may still be eligible
for the Farm Property Class tax rate if you satisfy the requirements
for an exemption.
- More than 50% of the property must be owned by Canadian citizens
or permanent residents of Canada.
- If the property is owned by a business which is a sole
proprietorship, the owner must be a Canadian citizen
or permanent resident.
- If the property is owned by a business which is a partnership,
more than 50% of the profit or loss of the partnership must
be allocated to the partners who are Canadian citizens or
permanent residents.
- If the property is owned by a business which is a corporation,
more than 50% of the voting shares must be owned by one or
more individuals who are Canadian citizens or permanent residents.
- A valid Farm Business Registration number is required for the
farm business operating on the land, unless one of the exemptions
applies and is granted. Under the Farm Registration and Farm
Organizations Funding Act, a farm business generating Gross
Farm Income of at least $7,000 as reported to Canada Revenue Agency
for income tax purposes must register annually with Agricorp
(1-866-327-3678). Continued eligibility for the Farm Property
Class tax rate requires the yearly renewal of your Farm Business
Registration number.
A farm property that does not meet these eligibility criteria is
classed in the Residential Property Class, and taxed at the full
rate set by the municipality.
The Ministry of Agriculture & Food and the Ministry of Rural
Affairs administers the application process for the Farm Property
Class Tax Rate, and is responsible for reviewing the above eligibility
criteria before a property can be placed in the Farm Property Class.
What you need from the vendor
In order to confirm the current assessment and tax rate classification
for the property, the documentation that would assist in providing
the complete picture includes:
- Most recent Property Assessment Notice.
- Most recent property tax bill.
- Copy of completed Farm Property Class tax rate application.
- Information on what has been done to ensure that the farm property
remains eligible for the 25 per cent tax rate for the next year
(e.g. did the vendor register the farm business in the current
year, to be eligible for the Farm Property Class next year).
Next Steps
On transfers of farm property or a change in the use of the property,
actions taken by MPAC and the options available to the new property
owner will be based on the status of the property at the time the
tax roll closes.
For example, if the property is assessed as a farm by MPAC and
in the Farm Property Class (indicated by "Farm"
on the property classification section of the Property Assessment
Notice) for the 2013 taxation year, at the time the tax roll closes,
there are two alternatives:
- When a new property owner is not going to continue to farm the
property, MPAC may issue a Property Assessment Change Notice to
reclassify the value of the property and also place the property
in the residential property class for tax rate purposes. The new
owner will pay the residential tax rate for the remainder of the
tax year.
- When a property is purchased by a farmer who owns other land
that has been classified in the Farm Property Class for 2013,
or a new owner starts farming and meets the eligibility criteria,
MPAC may choose not to issue a Property Assessment Change Notice
to reclassify the property. As a result, the property will remain
in the Farm Property Class for the remainder of the tax year.
This decision is often influenced by the time of year in which
the property transfer occurs.
However, if the property is assessed as a farm by MPAC but is in
the Residential Property Class (indicated by "Residential"
on the property classification section of the Property Assessment
Notice) for the 2013 tax year, at the time the tax roll closes,
there are also two alternatives:
- When a new property owner is not going to farm the property,
MPAC will not change the property classification and the new owner
will also pay the residential tax rate for the remainder of the
tax year. This decision is often influenced by the time of year
in which the property transfer occurs.
- If no longer being farmed, MPAC may also update the assessment
value for the property. This may occur within-year or at the
start of the next tax year.
- When a property is purchased by a farmer who owns other land
that has been classified in the Farm Property Class for 2013 or
a new owner starts to farm the property and meets the eligibility
criteria, the new owner may contact our
office and apply for the Farm Property Class tax rate for
the remainder of the tax year.
What if MPAC re-classifies your new property?
If you receive a Property Assessment Change Notice that reclassifies
your property so that it's taxed at the Residential Property Class
tax rate (full rate), you can:
- Contact the Ministry of Agriculture and Food for an eligibility
review. This must be done within the Request for Reconsideration
timeframe indicated on your Property Assessment Change Notice.
Applying for reduced rate for the future
Once the purchase is complete, make sure you apply to the Ministry
of Agriculture and Food so that your property is classed in the
Farm Property Class (the reduced rate) for the next year, as well
as future years after that.
If you buy your farmland early in the calendar year, the ministry
will normally send you an application, based on ownership change
records received from MPAC. This application is used to determine
the eligibility of your property for the following tax year. If
your purchase date is after June, it's best to contact the ministry
to advise the program administrator of the ownership change and
request an application. The deadline for sending in your application
will be printed on the form itself.
Demonstrating that the eligibility criteria are met and meeting
this deadline is very important. If you miss it, you will be required
to pay the full residential tax rate on your farm property for the
following year.
A list of properties meeting the Farm Property Class eligibility
requirements is submitted to MPAC on an annual basis. MPAC then
finalizes the property assessment rolls (for all properties, including
farm properties) for delivery to municipalities in December in the
year in advance of the actual tax year (e.g. December 2013 for the
2014 tax year). At this point, municipalities begin their budgeting
process and setting tax rates to meet their local requirements.
What is a gross farm income start-up exemption?
If your new farm operation does not yet generate $7,000 annually,
you may still be eligible for the Farm Property Class and reduced
tax rate if actively farmed in the year it was purchased.
To qualify, you must clearly demonstrate that the operation is
being farmed and will generate the $7,000 income in future years.
Information that should be provided includes:
- crop production plans for the first, second and third year,
including crops to be grown, acreage, expected yield, and price
- livestock production plans for at least the first, second and
third year, including the number raised, market weight/size and
price, as well as
- projected income statements for at least the first, second and
third year.
You should also include any actual expenses incurred to
date. The information should show how the $7,000 minimum income
will be made, and the minimum time-frame involved. The length of
the start-up period must be realistic relative to the commodity
being produced.
If you or your tenant are applying for a gross farm income start-up
exemption, please complete these
forms and return them with your Farm Property Class Tax
Rate application.
Further information
For questions regarding the Farm Property Class tax rate,
contact:
Ministry of Agriculture and Food
Ministry of Rural Affairs
Rural Programs Branch
1 Stone Road West, 4th Floor
Guelph, Ontario N1G 4Y2
Phone: 1-877-424-1300 or (519) 826-4047
Fax: (519) 826-3170
E-mail: farmtax.omafra@ontario.ca
Web site: www.ontario.ca/farmtax
Please be ready with your owner ID number, name, address, property
roll number and telephone number.
For further information about the classification or value of
your property, please contact:
Municipal Property Assessment Corporation (MPAC)
Phone : 1 866 296-6722
Web site: www.mpac.on.ca
For assessment or tax rate appeals, contact:
Environment and Land Tribunals Ontario
Assessment Review Board
655 Bay Street, Suite 1500
Toronto, ON M5G 1E5
Telephone: 416-212-6349 -OR- 1-866-448-2248 (toll free)
Fax: 416-314-3717 -OR- 1-877-849-2066 (toll free)
Website: www.elto.gov.on.ca