New Trust Reporting Requirements in Ontario: What You Need to Know
New trust reporting rules took effect in 2023, and they catch a lot of trusts that didn't have to file before. If you have a trust or are setting one up, you need to know what's changed.
Significant changes to trust reporting requirements apply to trusts with taxation years ending after December 30, 2023. If you have a trust or are considering setting one up, understanding these new obligations is essential.
What Changed?
Previously, many trusts—particularly bare trusts and certain family trusts—were not required to file annual tax returns with the Canada Revenue Agency (CRA) unless they had tax payable or disposed of capital property.
The new rules dramatically expand reporting requirements. For tax years ending on or after December 31, 2023, most trusts must file a T3 Trust Income Tax and Information Return annually, regardless of whether they have income to report.
Important: Bare Trust Exemptions for 2023 and 2024
The CRA has administratively exempted bare trusts from filing T3 returns and Schedule 15 (Beneficial Ownership Information) for the 2023 and 2024 tax years, unless specifically requested by the CRA. This exemption may change for future tax years.
Which Trusts Are Affected?
The new reporting requirements apply to:
- Bare Trusts: Including informal trusts where property is held by one person for another (subject to the 2023-2024 administrative exemption noted above)
- Family Trusts: Inter vivos and testamentary trusts
- Alter Ego Trusts: Trusts created for the settlor’s benefit during their lifetime
- Joint Partner Trusts: Trusts for the benefit of the settlor and their spouse
- Most Other Express Trusts: Unless specifically exempted
Exemptions
Some trusts remain exempt from the new reporting requirements:
- Trusts that have been in existence for less than three months at year-end
- Trusts that hold less than $50,000 in assets throughout the year (only certain types of assets)
- Registered plans (RRSPs, RRIFs, TFSAs, etc.)
- Mutual fund trusts
- Lawyers’ general trust accounts
- Certain other prescribed trusts
What Information Must Be Reported?
For each reportable trust, the T3 return must include information about:
Trustees
- Name
- Address
- Date of birth
- Tax jurisdiction of residence
Beneficiaries
- Name
- Address
- Date of birth
- Tax jurisdiction of residence
Settlers
- Name
- Address
- Date of birth
- Tax jurisdiction of residence
Anyone Who Can Exert Control
- Any person who has the ability to exert control over trustee decisions
Penalties for Non-Compliance
The penalties for failing to file or filing incorrect information are significant:
- Standard Penalty: $25 per day, minimum $100, maximum $2,500
- Gross Negligence Penalty: 5% of the maximum fair market value of trust property during the year, with a minimum of $2,500
- False Statements: Penalties for knowingly making false statements
Impact on Estate Planning
These new requirements have important implications for estate planning:
Bare Trusts
Many Canadians unknowingly have bare trusts. For example, if your name is on your elderly parent’s bank account for convenience, that may create a bare trust with reporting obligations.
Joint Property Arrangements
Joint ownership arrangements that were previously informal may now have reporting requirements.
Estate Administration
Executors and estate trustees need to be aware of these obligations when administering estates.
Steps to Take
1. Identify Existing Trusts
Review your arrangements to identify any trusts that may be subject to the new rules.
2. Gather Information
Collect the required information about trustees, beneficiaries, and settlers.
3. File Required Returns
Ensure T3 returns are filed by the deadline (90 days after the trust’s tax year-end).
4. Review Estate Plans
Consider whether existing trust arrangements should be restructured in light of the new requirements.
5. Seek Professional Advice
Given the complexity and penalties involved, professional guidance is strongly recommended.
How Frontier Law Can Help
Our wills and estates team can assist you with:
- Identifying trusts subject to the new requirements
- Reviewing existing trust arrangements
- Advising on restructuring options
- Coordinating with accountants for tax filing
- Creating new trusts that comply with current requirements
Don’t wait until the deadline approaches. Contact us to discuss your trust reporting obligations.
This article is for informational purposes only and does not constitute legal advice. For advice specific to your situation, please contact us for a consultation.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. For advice specific to your situation, please contact us for a consultation.