Do the CRA’s New ‘Bare Trust’ Tax Filing Rules Apply to You?

New rules from the Canada Revenue Agency indicate more Canadians could be filing a tax return for a trust this year. (Ground Picture/Shutterstock)

The Canada Revenue Agency’s new bare trust reporting rules will mean extra work for some Canadians filing a tax return this year.

A bare trust is an informal arrangement and can occur simply by adding someone’s name to an account or deed.

Most bare trusts now require a T3 Trust Income Tax and Information Return be filed, according to the Revenue Agency website.

“As a result, many trusts that did not previously have to file are now required to file an annual T3 return,” the agency said on its website. “The changes will help the CRA verify that trusts, their fiduciaries, beneficiaries, and related parties have met their tax and filing obligations under the Income Tax Act.”

Bare trust examples include a parent co-signing a mortgage for their child and their name going on the title, a parent who opens a bank account for a young child, or an adult child with joint ownership of a parent’s bank account, according to Money Sense.

The trustee in these situations is required to register for a trust number and would need to file the T3 return under the new rules.

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That means the parent who co-signed the mortgage or opened an account for a minor child, or the adult child with joint ownership of a parent’s account would all need to file. Some trusts with assets of less than $50,000 may be exempt from filing, however.

What is Required?

The CRA website describes the information trustees need to submit. In many cases, bare trusts do not require as much information as a formal trust but a copy of the trust document may need to be filed for the first return.

Every trust must have a name. In the case of a bare trust, this can typically be a list of all beneficiaries with the word ‘trust’ at the end of the document. It will also require a CRA trust number. These numbers are similar to a social insurance number and allow the agency to identify the taxpayer which, in this case, would be the trust.

Trust numbers can be acquired through the “trust account registration” option added to the CRA “My Account” tax pages earlier this year.

Those who miss the April 2 deadline may have to pay a penalty of up to $25 per day to a maximum of $2,500. The CRA is extending trustees a grace period for 2024 only. Beginning next year, all T3 returns will be due within 90 days of year-end.