With the winter meeting season in full swing, we found ourselves shoulder to shoulder with local farmer Billy Bottnpaidfor expecting to swap stories about fast cars and grumpy wives. Instead, we started talking about his recent experience with his AgriStability and AgriInvest accounts. His story got us thinking about how AgrIinvest should best be put to use.
In a nutshell, Billy had missed submitting his fee for participation in the 2008 AgriStability program year. Fortunately, he did not end up in a claim position but it left him wondering if we was still eligible to participate in the AgriInvest program. After a one hour phone call with 45 minutes of elevator music, Billy discovered that he was eligible to make a deposit that would then be matched by Agriculture and Agri-Food Canada.
Now he knew he could put funds in, but his curiosity was piqued about how and when he could take funds out. He asked what triggered a payout and realized that no trigger is required. The funds can be withdrawn at any time. Thinking back to the glory days of NISA, Billy had assumed a premium interest rate combined with tax sheltered interest growth would make withdrawing the funds unattractive. Billy asked, “Have I got a good interest rate on my agriinvest account?” The call centre clerk replied, “As good as the Roughriders 13th man during Grey Cup.”
It turns out the interest rate during the first part of December was 0.21 per cent — not even a quarter of one per cent. Billy thought the rate was calculated using a complex formula comprised of algebra and phonics divided by some statistics and calculus and then finally compared to the T-Bill rate to arrive at next to nothing.
After our discussion with Billy, it was clear that these funds should be withdrawn and put to more efficient use within his operation, the question was when and how. We listed the options for using the funds and they include prepay debt, prebuy inputs, make a deposit in his Tax Free Savings Account, buy RRSP’s, and the list goes on and on. At the very least, the TFSA and RRSP’s still offer some tax sheltered interest growth with a much higher rate of return.
HOW TO MAKE AN AGRIINVEST WITHDRAWAL
The most advantageous time to withdraw AgriInvest funds is during the first month of your fiscal year and as soon as the government matching portion is deposited. The reason for this is because the government matched portion is taxed in the fiscal year in which it is withdrawn. By withdrawing these funds in the first month, your business has the use of that money for 12 months before having to pay the tax. The request to make the withdrawal can be done three ways:
Call the administration toll free at 1-866-367-8506. Have your PIN number and some historical correspondence handy for ID verification.
Fax your withdrawal request form to the administration at 1-877-949-4885.
Mail your withdrawal request to AgriInvest Box 6100 Station Main, Winnipeg, MB, R3C 4N3. Withdrawal forms are available on the AgriInvest web site (www.agr.gc.ca/agriinvest)
Knowing Billy Bottnpaidfor, he will use the money to treat his wife to a sun filled, well deserved vacation and next time we meet, we will only talk about fast cars.
Andrew DeRuyck and Mark Sloane manage two farming operations in Southern Manitoba and are partners in Right Choice Management Consulting. With over 25 years of cumulative experience, they offer support in farm management, financial management, strategic planning, and mediation services. They can be reached at [email protected]and [email protected]or 204-825-7392 or 204-825-8443.