2023 Trust Reporting Requirements (T3 Return)

February 23, 2024

 

 The federal government recently released new federal trust reporting requirements that will be effective for taxation years ending after December 30, 2023 (which means that taxation years ending December 31, 2023, will be affected). These changes will have an impact on many trusts, including those previously exempt from reporting obligations.

Expanded Reporting for Trusts

The new rules significantly broaden the scope of trusts required to file an annual Trust Income Tax and Information Return (“T3”). This includes most personal trusts resident in Canada, even those without income tax liability or distributions during the year. Notably, bare trusts, often used in joint ventures, real estate holdings, or probate planning, may now also be subject to these new reporting requirements.

What Could Constitute a Trust?

  • Co-Signing or Being on a Property Title: If you have co-signed a loan or are on a property title to help someone (like a child) acquire a property, with the understanding that the benefit, profits, or control are theirs.
  • Estate Planning: Holding, controlling, or being named on assets that are intended to be passed on or utilized by others in the future.
  • Asset Management: Managing assets, be it money, bank accounts, property, or investments, with clear instructions (usually in writing) about who benefits or how the assets should be managed or distributed (this can include bank accounts held in more than one person’s name with a balance of $50,000 or more).

Trusts created for holding personal-use assets for estate planning or asset protection, such as those above, which may have previously qualified for the filing exception, will no longer be exempt under the new rules.

 

New Obligations and Requirements

Expanded T3 Return Filing Obligations

  • Previously, certain trusts, especially those with no activity or income tax payable (like those holding a vacation property), were exempt from filing a T3.  This exemption will no longer apply to most of these trusts starting in 2023.

For supporting information from Canada Revenue Agency, click the link below
CRA Media Release

 

Expanded T3 Return Reporting Requirements – Beneficial Ownership Information of a Trust:

  • Express trusts, non-resident trusts and bare trust arrangements may now be required to file a T3 return and must also report additional detailed information.
  • The new Schedule 15 in the T3 is now required to be completed and filed with all T3’s to report more the additional disclosures.
  • Schedule 15 requires the name, address, date of birth, jurisdiction of residence, and taxpayer identification number (SIN, BN, ITN) for each settlor, trustee, beneficiary, and any person with influence over trustee decisions.

To download the Schedule 15 form, click on the link below
Schedule 15

 

Exemptions from the expanded requirements

The following trusts are exempt from filing a T3 return:
  • Trusts that hold assets with a maximum fair market value (“FMV”) of $50,000 throughout the year (these assets are limited to deposits, government debt obligations, and listed securities)
  • Trusts that have been in existence for less than three months
  • Qualified disability trusts
  • Trusts governed by registered plans (including registered retirement savings plans and tax-free savings accounts)
  • Mutual fund trusts, segregated funds, and master trusts
  • Employee life and health trusts
  • Cemetery care trusts and trusts governed by eligible funeral arrangements
  • Lawyers’ general trust accounts
  • Graduated rate estates
  • Trusts, all the units of which are listed on a designated stock exchange
  • Trusts that qualify as non-profit organizations or registered charities
  • Certain government-funded trusts

Additionally, information subject to solicitor-client privilege is exempt from these new reporting requirements.

 Filing Deadline

  • The T3 return along with Schedule 15 must be filed within 90 days of the end of its fiscal year. Most of these trusts have a December 31, 2023, fiscal year-end and will be due by March 30, 2024

 

Non-Compliance Penalties

  • The penalty for non-compliance  is the greater of $2,500 or 5% of the trust’s maximum fair market value during the year. 
  • These are in addition to existing penalties for failing to file a T3 return, which also carries a maximum penalty of $2,500, meaning trusts could incur multiple penalties.
  • Standard late-filing penalties may also apply.

 

Conclusion

The new trust reporting rules mark a significant shift in the transparency and disclosure requirements for trusts in Canada. It is essential for trustees and relevant parties to understand these changes to ensure timely compliance. Our team at Fulcrum Group is here to assist you in navigating these new requirements so please feel free to reach out for further clarification or any assistance you may need in filing your T3s.