Bare Trusts No Longer Require a 2023 T3 Return

Four days prior to the filing deadline, the CRA announced that bare trusts are no longer required to file a T3 Return for the 2023 tax year (due in 2024).

Announced on March 28, 2024, (four days prior to the deadline) the Canada Revenue Agency (CRA) has declared that bare trusts will not be required to file a T3 Trust Income Tax and Information Return (T3) for the 2023 tax year unless the CRA makes a direct request for filing. Before this announcement, bare trusts had to file a T3 for the first time as of the 2023 tax year (due in 2024). While we share in the frustration caused by this and other changes and delays in the process, we anticipate the reinstatement of this filing requirement for the 2024 tax year and with bare trusts filing T3 returns for the first time in 2025. More information on the future of bare trust reporting is expected in the coming months.

If you have any questions about the ongoing changes to trust reporting requirements, winding up a trust, or if you may benefit from a trust, please contact a Bateman MacKay Tax and Business Advisor.

What is a Bare Trust?

The term bare trust is not defined in the Income Tax Act. However, it is a trust arrangement under which the trustee can reasonably be considered to act as an agent for all beneficiaries under the trust. Bare trusts are often established for a variety of purposes that facilitate the separation of legal and beneficial ownership of an asset. Some common examples of a bare trust include:

• Adding adult children’s names to bank accounts or property both for administrative and probate planning purposes. Such an arrangement could also apply to the family home.
• Having a parent’s name on title of a property so their child can qualify for a mortgage.
• Holding financial accounts In Trust For (ITF) children or grandchildren.
• A person (individual or corporation) holding full legal title of a property on behalf of another person.

Full Bare Trust Reporting Timeline

• February 2018 – First announced in the 2018 Federal Budget, the bare trust return requirements were expected to be filed beginning in the 2021 tax year.
• February 2022 – With legislation still pending, bare trust reporting requirements were not implemented.
• November 2022 – Trust reporting changes are delayed again, to be implemented for 2023 trust returns (due in 2024).
• February 2024 – Penalties removed for bare trust T3 returns filed after the deadline.
• March 2024 – Bare trusts are exempt from filing a T3 return for the 2023 tax year.