APPLY FOR AIDA? ABSOLUTELY
Originally published on July 27, 2000
A communications officer with the Agricultural Income Disaster Assistance administration recently asked why only 9,100 AIDA applications out of the expected 50,000 were now in their Winnipeg offices.
I said if 37,000 applications were filed for the 1998 claim year, then the same and more will be in Winnipeg by Sept. 1, the new deadline.
There are probably many reasons why farmers have waited to send in their AIDA applications, but I believe brushing it aside without examining your farm's eligibility is fiscally irresponsible.
There is up to $870 million allocated to the 1999 AIDA year. Using 1998 AIDA as a guide, this is an average payment of $16,650 per qualifying farm. Whether you are in hogs, beef or grain, this has to be worth at least a day of your time and frustration doing some number crunching.
If you don't like numbers and are hoping for a return of acreage-based payments, you could be waiting a long time.
At the July 5 meeting of agriculture ministers in Fredericton, N.B., a new three-year, $725 million annual Canadian Farm Income Program was announced. With what we've heard to date, this is simply AIDA with a makeover. The new program details will remain fundamentally AIDA.
All AIDA payments are based upon a farm's current year program margin. This should not be mistaken for gross profit. Program margin is an AIDA-NISA specific term.
For those who file to NISA on the accrual basis, it is a relatively easy number to recreate. Pull out your old NISA returns and follow this process:
Qualifying commodities and program payments (Total A) minus Qualifying commodities and repayment of program payments (Total D) and minus Eligible expenses (Total F) equals Program margin
For those farmers who file to NISA on the cash basis, adjustments must be made to the program margin for changes in inventories, receivables, payables and purchased inputs.
Once you have calculated your program margin for the 1999 claim year, you must calculate your applicable reference margin. This is the program margin average from three prior years. If your current year claim year margin falls below 70 percent of your reference margin, you are probably eligible for a payment.
The higher your farm's reference margins, the better chance you have for assistance. For grain farmers, it pays to have some luck.
On our farm we were fortunate to have missed bugs and drought during our reference period. We were also fortunate to have a good crop mix including record canola acres in 1996 and 1997.
This year, AIDA introduced the Olympic average reference margin. This enables the farm to report its reference margin on the preceding five-year period, excluding the highest and lowest years.
This is also the last year the federal government will cover negative margins and will pay its 60 percent share to producers.
Other AIDA planning points:
■ If you received a cheque from AIDA for the 1998 claim year, dig out your 1994 farm data. The Olympic average will probably help — definitely if you were in hogs.
■ If you are in cattle and you've never had it this good, consider electing to accrual file your next NISA return. It will give your NISA deposit account and future AIDA reference margin a boost.
■ If your Canadian Wheat Board grains declined in 1999 compared to previous years and if you file on the cash basis, you should consider the effects of the CWB adjustment schedule. This AIDA addendum has the effect of reclassifying 1999 income to the earlier reference period in which it originated.
■ If you are a landlord and your rent is based on crop yield and price, this income is considered allowable income for AIDA purposes. File an AIDA return.
■ If you have not undertaken any structural changes, you are not a beginning farmer and you file on the cash basis, you are eligible for the Modified Accrual Accounting Option. This allows applicants to adjust their reference period to account for changes in purchased inputs, crop and livestock inventory, accounts receivable and payables from the start of 1996 to the end of 1998.
■ If you have a farm income statement cluttered with a variety of business enterprises, consider appropriate enterprise reporting. Income from backhoe services or corral cleaning should be reported on a separate business statement within your tax return.
■ If you were a beginning farmer in 1999 and you reported no 1998 farming income to Revenue Canada, the AIDA administration will establish the missing reference years based on the size of the operation (acreage and/or herd size) in the claim year. Maybe you can cover some fungicide inputs and applications?
■ If you are having a bad year on the farm, you might still consider making payments to family members. Non-arm's length salaries are now treated as eligible expenses and these wages could increase your likelihood for assistance.
Don't worry AIDA, there will be a prairie tide of applications coming in. When they arrive, harvest them quickly and efficiently. We'll be in the fields doing the same.
Allyn Tastad, chartered professional accountant, is a partner in the accounting firm of Hounjet Tastad Harpham in Saskatoon at 306-653-5100, e-mail at email@example.com or website www.hth-accountants.ca. All data and information provided is for informational purposes only. Readers are cautioned that laws and regulations are subject to change. Consult your accountant for current professional advice tailored to your situation.