Understanding Trust Reporting Rules in Canada: What You Need to Know This Tax Season 0

Posted On February 8, 2024, by Tracey Bastedo

New for the 2023 tax year, the Canada Revenue Agency (CRA) has introduced significant changes to trust reporting rules. These changes have expanded the scope of required reporting, including a notable inclusion of bare trusts that did not have to file in the past. There are many common situations that may constitute reportable bare trusts, in which no lawyer or written agreement may have ever been involved or drafted. Many parties involved in a bare trust arrangement may not realize that they are, much less that there may be a filing requirement with CRA. This article will provide an overview of these changes and help you understand how they might affect you.

Expanded Reporting Requirements:

One of the most significant changes in trust reporting is the inclusion of bare trusts that did not have to file in the past. Bare trusts typically exist in scenarios where one entity/person has legal ownership, but is holding it in Trust for the Benefit of another entity/person.

Under the new rules, a trust return will have to be filed in the following situations:

  • Home ownership
    • Child on title for right of survivorship of parent’s house
    • Parents on title for financing of child’s house
    • Corporations who own property for benefit of an individual (the corporation will now have to file a T2 Corporate Tax Return and a T3 Trust Tax Return)
    • Individuals who own property for benefit of a corporation
  • Bank accounts or non-registered investment accounts
    • Child is a joint owner of a parents bank account (for example for probate purposes)
    • Parent is a joint owner of minor child’s bank account – parent is holding the ownership In Trust For the child

Key Disclosure Requirements:

In cases where filing is required, the identity and residency of all trustees, beneficiaries, settlors, and anyone with the ability to influence trustee decisions regarding income or capital must be disclosed.

Filing Deadlines:

Trust returns for the 2023 taxation year are due within 90 days after December 31, 2023, with a filing deadline of March 30, 2024.

Penalties for Non-Compliance:

It is essential to note that even if there are no taxes owing, late filing can result in penalties. Failure to meet the required filing deadlines and disclosures on time can result in penalties of $25 per day, up to a maximum of $2,500, as well as further penalties on any unpaid taxes. New gross negligence penalties may also come into play and could be as high as 5% of the highest total fair market value of all property held by the trust during the year.

The recent changes in trust reporting rules by the CRA for the 2023 taxation year bring significant implications for trusts and estates, including bare trusts that were previously exempt from filing requirements. It is crucial for affected parties to be aware of these changes and ensure compliance with the new regulations. Seeking professional advice and assistance is recommended to navigate these complex reporting requirements effectively. If you believe your situation may be subject to these new rules or have any questions, reach out to a qualified CPA or tax professional for guidance.

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This blog is not meant to provide specific advice or opinions regarding the topic(s) discussed above. Should you have a question about your specific situation, please discuss it with your GBA advisor.

GBA LLP is a full-service accounting firm in the Greater Toronto Area, but we primarily service all of Ontario as well as the rest of Canada virtually, except Quebec. Our team of over 30, provides Audits and Reviews of financial statements, and Compilations of financial information, as well as corporate tax returns.  We provide specialized corporate tax and succession planning for small and medium businesses, in addition to general advisory services.

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