05 Dec Update on Trust Reporting Requirements
Previously, a Trust generally only filed a T3 Trust Income Tax and Information Return if it had income, taxes payable, or made a distribution to one of its beneficiaries during the year. The T3 Return must be filed within 90 days after the end of the Trust’s tax year.
Going forward, a Trust must file a T3 Return regardless of any activity during the year. Examples of Trusts that will be required to file are all Family Trusts, Alter Ego Trusts, Joint Partner/Spouse Trusts, and Bare Trusts. There are some limited exceptions to these filing requirements such as Trusts with less than $50,000 in certain assets, trusts that existed for less than three months, and certain other exemptions.
In addition, each Trust must now report information on all trustees, beneficiaries, settlors, and any person who can exert control or override trustee decisions on the appointment of the Trust’s income or capital (e.g., a protector), including:
- name and address
- date of birth
- country/jurisdiction of residence, and
- taxpayer ID, such as SIN, trust account number, business number, or taxpayer ID used in a foreign jurisdiction
The Federal Government has released the final legislation, which should be approved by Parliament in the coming weeks. The biggest change is delaying the implementation of these new reporting requirements by another year, so for Trusts that have taxation years that end on and after December 31, 2023.
Although these rules have been delayed until 2023, now is a good time to prepare. Here are some practical tips to consider:
- Trustees should review their Trusts prior to December 31, 2022 to determine whether the Trust should be wound up if it no longer serves its purpose. Close in-trust accounts that are no longer necessary. If these changes are made in 2023, then the Trust would still have an obligation to file and report this detailed information in its 2023 return.
- Prior to 2023, consider restructuring existing trusts to remove beneficiaries that are no longer required so you don’t need to disclose their information.
- Start gathering the detailed information required for the trustees, beneficiaries, and settlors.
Questions? Please reach out to your contact at Clearline or get in touch with us.