The Regulations Amending the Income Tax Regulations (2023–2024 Livestock Deferral), SOR/2025-194, under the authority of the Income Tax Act, introduce amendments to facilitate tax deferral for farmers affected by drought, flood, or excess moisture conditions during the 2023 and 2024 taxation years. These regulations are designed to mitigate the financial impacts of extreme weather events on the agricultural sector by allowing farmers to defer income inclusion arising from the forced sale of breeding livestock.

The regulations address an issue faced by farmers in regions where adverse environmental conditions significantly reduce forage yields. Under such circumstances, farmers may be compelled to sell breeding livestock, including cattle, goats, sheep, horses, and breeding bees, because maintaining these animals becomes cost-prohibitive. Ordinarily, income from the sale of livestock must be reported in the year of sale and taxed accordingly, while the cost of replacement livestock purchased within the same year can be deducted. However, in areas affected by drought, flood, or excess moisture, livestock replenishment rarely occurs within the same year, resulting in an income tax liability without a corresponding deduction. This situation can impose substantial financial strain on farmers struggling to recover their breeding populations.

The livestock tax deferral provision, established under section 80.3 of the Income Tax Act, allows eligible farmers to defer a portion of the income from the sale of breeding livestock to the following taxation year or subsequent year, depending on the persistence of adverse conditions. Eligibility for deferral requires that the breeding livestock population be reduced by at least 15 percent. When the population reduction is between 15 and 30 percent, 30 percent of net sales income can be deferred. If the reduction reaches 30 percent or more, farmers may defer 90 percent of net sales income.

The process for designating eligible regions involves close collaboration between the Department of Finance and Agriculture and Agri-Food Canada (AAFC). Initially, AAFC compiles a preliminary list of regions affected by adverse conditions, typically published in July or August, with updates provided as more data becomes available. Final lists are confirmed in December or early the following year, once final forage yield information is assessed.

The 2023 and 2024 amendments officially designate the prescribed regions eligible for tax deferral, allowing farmers who sell breeding livestock due to drought, flood, or excess moisture to defer income inclusion for these years. By enabling a portion of the proceeds from livestock sales to be excluded from taxable income, the regulations provide critical financial relief and support the recovery and replenishment of breeding populations. The list of prescribed regions for each year is maintained and published on the AAFC Livestock Deferral Provision webpage, ensuring transparency and accessibility for farmers seeking guidance on eligibility.

Canada (194/2025) October 14, 2025
Disclaimer: Insights are for informational purposes only and do not reflect RRI’s official position or constitute legal opinion.