At Crowe MacKay LLP, our trusted advisors prioritize understanding your needs. Our advisors will explain two major tax changes that are coming in 2025: new Trust Reporting Requirements and updates to the Underused Housing Tax (UHT).
Trust Reporting Requirements
Last year, new reporting requirements were introduced for trusts requiring most trusts with taxation years that end on or after December 31, 2023 to file a T3 return, regardless of income or activity levels with some exceptions. They were required to disclose information about the settlor, trustees, beneficiaries (including contingent beneficiaries) and protectors, such as their name, address, date of birth, jurisdiction of residence, and taxpayer identification number (e.g., SIN).
Canada Revenue Agency subsequently announced that it would not require bare trusts to file a T3 return for the 2023 taxation year. Canada Revenue Agency has now extended this policy such that bare trusts are still exempt from filing a T3 return for the 2024 taxation year, unless directly requested by them.
The Department of Finance introduced draft legislation which, if enacted into law, would exempt certain additional types of trusts (including bare trust arrangements; see below) from the new trust reporting requirements for 2025 taxation year.
Certain trusts are excluded from these new rules, including:
- trusts that have been in existence for less than three months,
- trusts that hold assets with a maximum of $50,000 in fair market value throughout the year,
- trusts where each trustee and beneficiary is an individual, each beneficiary is related to each trustee, and holds assets with a maximum of $250,000 in fair market value throughout the year (these assets are limited to deposits, GICs, government debt obligations, interests in mutual funds, listed securities, personal-use property and the right to receive income from these assets),
- money held by a regulated professional in separate trust accounts for clients if money is the only asset and does not exceed a maximum of $250,000 in fair market value throughout the year,
- a regulated professional’s general trust account that only holds money,
- graduated rate estates, and
- qualified disability trusts.
Certain arrangements are also excluded from these new rules, including:
- each legal owner of the property is also a deemed beneficiary,
- an individual holds real property that would qualify as their principal residence for the year and is used by their spouse or common-law partner,
- related individuals hold real property that would qualify as the principal residence of one or more of the legal owners for the year,
- the property is held by the legal owner pursuant to a court order, or
- the general partners of a partnership hold property solely for the use or benefit of the partnership, where the partnership is required to file a T5013 information return for the relevant fiscal period.
There are significant penalties for non-compliance, so you should start gathering the required information if these rules apply to you.