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Trust Changes

Published on December 12, 2018

The 2018 federal budget included significant changes to filing requirements applicable to trust (T3) income tax returns. These new rules mean that starting in 2021 many family trusts, which given past rules were not required to file annual income tax returns, will now need to do so. 

Given the unfairly high statutory penalty for non-filing (or other non-compliance), it is important to communicate these changes to ensure taxpayers are aware of them. 

The minimum penalty is $2,500 per year.  The maximum, on the other hand, is 5% of the value of assets held by the trust.  Imagine the possibility that a family member had in the past transferred a Muskoka cottage into a family trust in order to minimize potential family conflicts, and ensure all extended family members would continue to enjoy it.  In the past, if the only use of the cottage was for family, then there would have been no requirement to file an annual T3 return.  Under the new rules, however, a return is required and the penalty for non-filing could be shockingly high.    

If you have any questions about these or other changes affecting trusts, please contact us.

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