19 Jun Bare Trust Reporting: Final Update on T3 Filing Requirements
Bare Trust Reporting: Final Update on T3 Filing Requirements
What Canadian Taxpayers Need to Know
After several years of uncertainty, the Government of Canada have legislated the final changes for the reporting requirements for bare trusts. The Canada Revenue Agency (CRA) has provided some guidance, and we expect more before the first filing deadline on March 31, 2027.
What Is a Bare Trust?
A bare trust exists when one person (the trustee) holds legal title to property for another person (the beneficiary), who retains all beneficial ownership and control over the property.
Common examples may include:
- A parent added to a child’s property title solely to help qualify for a mortgage.
- An “in trust for” (ITF) investment account established for a child or grandchild.
- Joint bank accounts used for convenience or estate planning.
- Nominee arrangements involving corporations or real estate holdings.
Historically, bare trusts were generally not required to file an annual T3 Trust Income Tax and Information Return (T3 Return) unless specific circumstances applied.
The Expanded Reporting Rules
The federal government introduced enhanced trust reporting rules to increase transparency around beneficial ownership. Under the original proposals, all bare trusts would have been required to file:
- A T3 Return, and
- Schedule 15, Beneficial Ownership Information of a Trust.
The reporting requirements would have required disclosure of trustees, beneficiaries, settlors, and individuals who exercise control over trust decisions.
Bare trusts were exempt from expanded T3 Return reporting obligations for 2023, 2024, and 2025 taxation years due to widespread uncertainty and administrative concerns. Now that these final changes have been passed by the government, bare trusts will need to file a T3 Return for the 2026 taxation year. These first T3 Returns will be due March 31, 2027.
Common Bare Trust Reporting Exemptions
While the reporting requirements may apply to many bare trust arrangements, the government has several important exemptions that would exclude many common family and personal situations from the filing rules.
Examples of arrangements that may qualify for an exemption include:
- Trusts holding any assets with a fair market value of $50,000 or less throughout the year. This can be any type of assets.
- Trusts holding assets with a fair market value of $250,000 or less throughout the year, provided the assets consist only of qualifying property such as cash, government debt obligations, and publicly traded securities.
- Related parties on title together for their principal residence and does not have a beneficial ownership interest. An example of this is where a parent is added solely to help a child obtain mortgage financing, or a child is on title of their parents’ principal residence for estate planning purposes.
- Trusts that have existed for less than three months at year-end.
- Certain partnership and court-ordered trust arrangements that are specifically excluded under the proposed legislation.
It is important to note that these exemptions depend on the specific facts of each situation. A seemingly straightforward arrangement may still be considered a bare trust and require reporting if the exemption criteria are not met.
Bare trusts involving corporations or any real estate held for investment purposes are most likely not to qualify for any exemptions and will have a filing obligation.
Why This Matters
The penalties for not filing a T3 Return are up to $2,500 per year. These can add up to very significant amounts if not identified correctly and reported in a timely manner.
How Clearline CPA Can Help
Determining whether a particular arrangement constitutes a bare trust can be complex. Common family, real estate, and corporate ownership structures may create reporting obligations once the new rules come into force.
We encourage you to speak with your Clearline CPA advisor if you have:
- Jointly owned property,
- ITF accounts,
- Nominee ownership arrangements,
- Family estate planning structures, or
- Corporate property held by another party,
We can help assess your situation and ensure you are prepared for any future reporting requirements.
Questions about bare trust reporting? Contact the Clearline CPA team for guidance tailored to your specific circumstances.
