Purtzki, Johansen + Associates

Blog

New Reporting Requirements for Trusts!

There are new rules applicable to taxation years on or after December 31, 2022, which require trusts, including bare trusts, to annually file T3 trust income tax returns and disclose the following:

  • name and address;
  • date of birth;
  • jurisdiction of residence; and
  • taxpayer identification number (TIN)

of any person who is a trustee, beneficiary or settlor of the trust.

A major surprise is that these new rules apply to bare trust arrangements.

What is a bare trust?

A bare trust is most common in real estate transactions. A bare trust exists where a person, the trustee, has been given legal title and has no other responsibilities other than to convey legal title to the trust property on demand according to the instructions of the trust beneficiary.

Filing requirements

The new rules will require enhanced reporting for trusts with a December 31, 2022 taxation year-end. For example, any family trust in existence in 2022 for greater than 3 months, including trusts wound up in 2022, would have a December 31, 2022 taxation year-end and be subject to the enhanced reporting rules.

Exclusions from the new rules

  • trusts that have been in existence for less than 3 months;
  • trusts that hold less than $50,000 in assets throughout the taxation year provided that their holdings are limited to deposits, government debt obligations and listed securities. (Note: This exception does not apply if the trust holds any interest in real estate or a private corporation.)

Penalties

Failure to comply with these requirements will result in significant penalties.

If the trust fails to meet the filing deadline, it will be subject to a penalty of $25 per day, with a minimum penalty of $100 and a maximum of $2,500. If the trust fails to file, either knowingly or due to gross negligence, the additional penalty will be the greater of $2,500 or 5% of the maximum value of the property held during the year.

As a trustee, you may want to familiarize yourself with the new rules due to the greater compliance requirements than in prior years.

We would be delighted to help you navigate through the new legislation!

Linked In
twitter

© 2024 Purtzki, Johansen + Associates
All Rights Reserved.

Back to Top