Canada’s tax agency says it doesn’t expect Canadians who hold simple trusts, known as bare trusts, to file required tax forms this coming tax season — but legislative changes currently before the House of Commons means the requirements will likely be in place in 2027.
The Canada Revenue Agency (CRA) announced Tuesday that it is again holding off on requiring Canadians to file T3 tax forms for bare trusts this year. The notice comes after the agency first decided to pause the requirements in the middle of a chaotic 2024 tax filing season.
The government introduced new tax reporting rules for trusts in 2022 that were slated to take effect for the 2023 tax year. While the rules were brought in to target things such as money laundering, terrorist financing and tax avoidance, thousands of Canadians who had simple bare trusts found themselves having to file complicated forms.
The CRA made a last-minute decision to pause the reporting requirements for bare trusts in March 2024 — just days before the filing deadline — citing an “unintended impact on Canadians.”
A bare trust relationship is one where a person, known as a trustee, holds legal ownership of a property or asset but not beneficial ownership. The “trustee can take no action without instructions from that beneficiary and the trustee’s only function is to hold legal title to the property,” according to the government’s definition.
Unlike more complex trusts that are typically created by a lawyer at the request of their client, bare trusts can happen almost accidentally — when a parent co-signs a mortgage with their child and becomes partial owner, or when an aging parent lists their children on a bank account to help pay the bills.
The Finance Department put forward proposals this past summer that would clarify the rules and omit some of the more simple bare trust relationships.
The government introduced those new rules as part of Bill C-15, the budget implementation act, which is set to be studied at committee when MPs return to Parliament Hill in the new year.
The CRA announced Tuesday that it will not be enforcing bare trust reporting requirements while C-15 is before the House — but the tax agency noted that the changes will likely be in place for the 2026 tax year.
“Certain bare trusts will be required to file for taxation years ending on or after Dec. 31, 2026,” the CRA said in a statement.
The proposed changes, put forward in the bill, would exempt certain bare trusts, according to the Finance Department. Such exemptions include:
A case where an adult child is jointly named on the bank account of an elderly parent could also be exempt under the proposed changes, as long as the value of the account is below $250,000.
Ryan Minor, a director with Chartered Professional Accountants of Canada, said he’s hopeful that by implementing the new rules next year, it will give enough time for affected Canadians to prepare.
“That gives us a window of a little over 12 months to get ready. So it’s better. Will it be enough? I hope so,” Minor told CBC News.
The CRA’s watchdog blasted the tax agency for its last-minute pause in 2024, saying it led to “wasted time and effort.”
More than 44,000 taxpayers — some of whom paid tax filers to fill out the paperwork on their behalf — still filed bare trust forms in 2024.
Canada’s Taxpayers’ Ombudsperson François Boileau found that the CRA didn’t provide timely information to allow taxpayers and tax professionals to prepare for the new filing requirements.
To avoid a similar situation with the new updates, Minor said the tax agency will need to provide clear guidance as to what it expects — and what it doesn’t — so it’s clear to average Canadians.
“What we’d like to see is clarification where they specifically say, “In these situations you don’t have to file,'” he said.
“I’d like to see them fill in the blanks and get us some good guidance.”
Canadians filing the bare trust forms won’t owe taxes on those trusts, but they could face steep penalties for failing to file.
C-15 will still need to clear both houses of Parliament before it becomes law.
