The Livestock Tax Deferral provision allows farmers who sell part of their breeding herd due to drought or flooding in prescribed drought or flood regions to defer a portion of sale proceeds to the following year.

How the provision works:

To defer income, the breeding herd must have been reduced by at least 15%.

  • Where the breeding herd has been reduced by at least 15%, but less than 30%,
    • 30% of income from net sales can be deferred.
  • Where the breeding herd has been reduced by 30% or more,
    • 90% of income from net sales can be deferred.

Breeding animals include:

  • Bovine cattle, bison, goats, sheep, deer, elk and other similar ungulates kept for breeding as well as horses that are kept for breeding.
  • All breeding animals must be older than 12 months.

How does the tax deferral work?

  • In a year in which a region has been prescribed, income from livestock sales is deferred to the next tax year when the income may be at least partially offset by the cost of reacquiring breeding animals, thus reducing the potential tax burden.
  • In the case of consecutive years of drought or excess moisture and flood conditions, producers may defer sales income to the first year in which the region is no longer prescribed.

What are the criteria to Prescribe Drought & Flood Regions?

  • Prescribed regions are designated, on the advice of the Minister of Agriculture and Agri-Food Canada to the Minister of Finance, when forage yields are less than 50% of the long-term average as a result of drought or flooding in a particular year.
  • To be designated, the affected area must have recognized geopolitical boundaries and be large enough to have an impact on the industry.
  • Impacts on individual municipalities/regions would not result in a designation.

A national list of the prescribed regions can be found on the Government of Canada website HERE.