The Canada Revenue Agency (CRA) introduced new reporting requirements for declaring income and assets held in trust, which came into effect for the 2024 tax year. This blog explores the new trust requirements and how they affect our local Grande Prairie Business community during tax season. If you are considering starting a trust account as part of your business’s financial plan, please seek personalized, professional advice.
What is a Trust?
Trusts can be used for various purposes, such as estate planning, asset protection, and tax planning,
What is Trust Reporting?
In the simplest form, trust reporting means completing and filing a T3 return with your personal tax return.
Who Needs to Report?
Express trusts, set up on purpose by the settlor, are generally required to file annual T3 Trust Income Tax and Information Returns under the new rules. This type of Trust encompasses a range of categories, including Family, Business, Estate, Bare (see below), Investment and Charitable.
There are a few examples of Express Trusts where reporting is exempt, such as:
- Trusts that are less than three months in age
- Trusts with less than $50,000 in assets, in certain categories only.
- Trusts that serve specific functions, such as those operated by charities.
Bare Trust Changes
Bare Trusts refer to arrangements where a trustee holds legal title to a property but has no discretion over its use. Instead, the trustee acts solely on the beneficiary’s instructions. Previously, this trust category was only required to report when the assets exceeded $50,000. However, under the recent changes, Bare Trusts may be required to file a T3 Return and Schedule 15 if the CRA makes a direct request for these filings. (See the T3 Trust Guide)
Who is Most Affected?
Businesses and individuals who previously were not required to report on their trusts may face reporting requirements for the first time. Confirm if the 2024 tax year’s expanded trust reporting applies to your trust account type and status before submitting your annual returns, to avoid penalties for late or non-filing of the T3.
What is Required in the T3 Return?
Filers can also expect to provide additional information about all trustees, current and future beneficiaries and settlors included in the trust. Details requested on the return include:
- Names
- Addresses
- Birthdates
- Taxpayer Identification Numbers (TIN)
- Trust structure and operations
- Changes to the Trust
Why Is Reporting Expanding?
The CRA cites that the government expanded trust reporting requirements to encompass a broader range of trusts to increase transparency in financial reporting.
Overall, the new reporting requirements for Canadian Trust Reporting are wide-ranging. Keeping detailed records of all trust-related activities and parties involved, and obtaining a TIN from the CRA if your trust doesn’t already have one, are smart steps to prepare for reporting. Always seek professional advice on new financial regulations and reporting requirements that may apply to your business. Contact McNabb Lucuk LLP for personalized advice on using Trusts as part of your financial plan.
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