Changes to Trust Reporting Requirements

Note:  This is a further update to our article published on October 12, 2022.

As we have previously written, there are new reporting requirements for trusts that will result in trustees having to file a trust tax return (T3 return) by March 31, 2023 for trusts that did not previously have to file.

In Trust For accounts

Of particular note is that these new reporting requirements will apply to “In Trust For” (ITF) accounts.  ITF accounts are commonly used to hold bank accounts and investment securities on behalf of minor children, grandchildren or other family members.

There is an exception for ITF accounts where the fair market value does not exceed $50,000 throughout the year and the assets consist of cash, government debt obligations and publicly traded securities, including mutual funds or segregated funds.  However, if the investments in these accounts include private company shares or crypto-currency units, the reporting requirement automatically applies, regardless of the account value, and the trustee will be required to file a tax return for the trust.

What is the reporting requirement?

The return must provide the following information on the settlor, trustees and beneficiaries of these trusts:  name, address, date of birth, taxpayer identification number (e.g., social insurance number) and jurisdiction of residence.

What are the penalties for failure to file?

Failure to file returns for such accounts, including the information schedule, could result in penalty assessments by Canada Revenue Agency (CRA), of $25 per day (minimum $100) up to a maximum penalty of $2,500.

In addition, further penalties of up to 5% of the fair value of the property held in trust could be assessed if a person knowingly or under circumstances amounting to gross negligence makes a false statement or omission in a T3 return.

What you should do?

If you are a trustee of a trust or hold legal title to any property on behalf of someone else, then you need to review the new trust reporting requirements.

Please contact Lott & Company to discuss how these new reporting requirements may apply to you.