New T3 Filing Requirements

The Federal Government has extended T3 Return reporting requirements to include filings for bare trusts. In a bare trust, the trustee acts as an agent for beneficiaries when managing the trust’s property. This often involves legal title ownership held by one party (Bare Trustee) on behalf of another party (Beneficiary).

Common examples of bare trust arrangements, whether documented or undocumented, are as follows:

1. Parent or grandparent on title of a residential property for financing purposes for the homes of their children/dependents.
2. Individual on title of their parents’ and grandparents’ residential property for probate and estate planning purposes.
3. Bank or investment accounts held in trust for children/grandchildren.
4. One spouse being the only person on title for a home in which is shared with the other spouse.
5. Shareholder or corporation on title for properties held on behalf of a different corporation.

Please note: The above are common examples only and do not include all situations which bare trusts may be present.

If any of the above applied to you at any point in 2023, you may have a new filing obligation.

The deadline for T3 Returns for the December 31, 2023 tax year is March 30, 2024.

If it is determined that a bare trust is present, additional underused housing tax (UHT) reporting requirements may apply.

Exemptions:

There may be some bare trusts that are exempt from the new reporting requirements, including those in existence for less than three months at the year-end, trusts holding less than $50,000 in assets throughout the year, registered plans (TFSA, RRSP, RESP, etc.), qualified disability trusts, and more.

Penalties for Failure to File:

Failure to file a T3 Return can mean penalties of $25 per day, with a minimum of $100 and a maximum of $2,500. However, the CRA will waive the penalty for bare trusts filing after the deadline for the 2023 tax year, considering that some bare trusts are unaware of the changes. That said, a gross negligence penalty may apply for knowingly negligent failures to file a return. This penalty is 5% of the property value held in trust with a minimum of $2,500, and this penalty, despite the 2023 waiver, is applicable to bare trusts.

Failure to file a UHT return can mean penalties of $5,000 per individual and $10,000 per corporation, per property owned. The deadline to file the related UHT returns is April 30, 2024.

What’s Next:

The changes to the T3 reporting requirements are extensive and complex. Our tax experts can help you to identify whether your trust is affected and guide you through the process of filing, ensuring that all the necessary information is included, or help you determine if your trust is exempt.

We encourage you to contact us as soon as possible so we can help you complete your T3 return quickly and accurately before the approaching deadline.

Contact DDL & Co. in the Niagara Region to Help You Complete Your T3 Return

A professional accountant can guide you on several tax credits and deductions you are eligible for and help you prepare all the necessary documentation to claim those benefits. The experts can even guide you on how to make the most of these benefits. To learn more about how DDL & Co. in St. Catharines can provide you with your tax planning, contact us online or by telephone at 905-680-8669. 

If you believe that the new reporting requirements apply to you, or have any questions regarding the new reporting requirements, please email Pietro De Luca at pietro@ddlaccounting.com or Adam Dingman at adam@ddlaccounting.com explaining your situation in as much detail as you can.