The landscape for trust reporting in Canada has undergone significant transformation in recent years, culminating in the August 2025 draft legislation that further refines the enhanced T3 trust reporting requirements. These changes, which have evolved rapidly since their initial introduction for the 2023 tax year, are of critical importance to CPAs, estate planners, and trustees. The following article provides an overview of the legislative background, describes the new carve-outs for bare trusts, and offers additional information and practical guidance for practitioners.
Legislative background
The enhanced trust reporting rules were first introduced in the 2018 federal budget and subsequently enacted for taxation years ending after December 30, 2023. The rules were further clarified and expanded in the August 2025 draft legislation, which is expected to be enacted later this year.1 The legislative intent is to ensure that the Canada Revenue Agency (CRA) has access to comprehensive beneficial ownership information for trusts, thereby strengthening the integrity of the Canadian tax system and supporting anti-money-laundering efforts.
The core legislative provisions are found in section 150 of Canada’s Income Tax Act (ITA) and section 204.2 of the Income Tax Regulations (Regulations). The August 2025 draft legislation introduces important amendments to these sections, including new exemptions, expanded definitions, and technical clarifications.
Who must file: The general rule
Under the proposed regime, all express trusts resident in Canada2 and certain non-resident trusts are required to file an annual T3 Trust Income Tax and Information Return (T3 return), unless they qualify for a specific exemption. This includes many trusts that previously had no filing obligation, such as inactive family trusts and certain bare trusts.
For trusts that are required to file, the T3 return must now be accompanied by Schedule 15 (Beneficial Ownership Information of a Trust), which discloses detailed beneficial ownership information for all reportable entities associated with the trust.
Key legislative updates for 2025
1. Carve-out for bare trusts
A major development in 2024 and 2025 has been the temporary administrative relief for bare trusts. In October 2024, the CRA announced that bare trusts are not required to file a T3 return or Schedule 15 for the 2023 and 2024 tax years, unless specifically requested. This relief was provided in response to concerns about the unintended compliance burden, particularly in common bare trust scenarios such as nominee arrangements for real estate or joint bank accounts for estate planning.
The August 2025 draft legislation provides further relief by repealing the broad inclusion of bare trusts for reporting purposes for tax years ending after December 30, 2024. Instead, only bare trusts that are also express trusts under applicable law and do not meet a specific exception will be required to file. The legislation also introduces a new set of exceptions designed to provide greater certainty for taxpayers and practitioners (see section #3).
2. Expanded definition of “listed trusts”
While they may be required to file a T3 return under certain circumstances, “listed trusts” are exempt from the enhanced beneficial ownership reporting requirement (i.e., Schedule 15). The August 2025 draft legislation expands and clarifies the list of listed trusts in ITA subsection 150(1.2). The updated list includes:
- Trusts in existence for less than three months at year-end;
- Trusts where the family trust exemption applies (see section #3 below);
- Trusts holding assets with a total fair market value not exceeding $50,000 throughout the year, provided the assets are limited to certain prescribed types (e.g., cash, publicly traded securities, mutual fund units);
- Trusts required under professional conduct rules (e.g., lawyers’ general trust accounts);
- Registered charities, non-profit organizations, mutual fund trusts, related segregated fund trusts, master trusts, graduated rate estates, qualified disability trusts, employee life and health trusts, and certain government settlement trusts;
- Trusts governed by registered plans (RRSPs, RRIFs, TFSAs, RESPs, RDSPs, and FHSAs); and
- Employee ownership trusts (effective for tax years ending after December 30, 2025).
3. The $250,000 family trust exemption
A significant new exemption, effective for tax years ending after December 30, 2024, is the “family trust” carve-out. Under new ITA paragraph 150(1.2)(b.1), a trust is exempt from the enhanced reporting requirements if:
- Each trustee is an individual;
- Each beneficiary is an individual (not a trust, except for a graduated rate estate of a deceased beneficiary);
- Each beneficiary is related to each trustee (with the definition of “related” expanded to include aunts, uncles, nieces, and nephews);
- The total fair market value of the trust’s property does not exceed $250,000 throughout the year; and
- The trust’s assets are limited to certain prescribed types (e.g., cash, GICs, and personal-use property).
The $250,000 family trust exemption is intended to relieve small, closely held family trusts from the compliance burden of the new rules.
4. Additional carve-outs and clarifications
The August 2025 draft legislation also introduces or clarifies exemptions for:
- Trusts where all legal owners are also beneficiaries (e.g., joint bank accounts);
- Trusts holding a principal residence for a spouse or related individuals (e.g., where legal title is held by a parent solely to support a child’s mortgage application, while beneficial ownership remains with the child);
- Trusts holding property solely for the use of a partnership, where all legal owners are partners and the partnership files a T5013;
- Trusts established by court order;
- Trusts holding Canadian resource property for public companies or their subsidiaries; and
- Non-profit organizations holding government funds for other non-profits.
Schedule 15: Beneficial ownership reporting
For trusts that are not “listed trusts” and do not qualify for another exemption, the filing of Schedule 15 is mandatory. Schedule 15 requires the disclosure of specified information for all “reportable entities,” including:
- Trustees;
- Settlors, as defined in the Regulations;
- Beneficiaries, including contingent and discretionary beneficiaries, unless their identity is not ascertainable with reasonable effort3; and
- Controlling persons—e.g., protectors or anyone with the ability to influence trustee decisions regarding income or capital.
The required information for each reportable entity includes:
- Name;
- Address;
- Date of birth (if an individual);
- Country of residence; and
- Tax identification number (i.e., SIN, BN, trust number, or foreign TIN).
If a beneficiary’s identity is not known or ascertainable with reasonable effort (e.g., unborn children or grandchildren), the trust must provide a detailed description of the class of beneficiaries or the relevant trust terms.
Filing mechanics
Schedule 15 must be filed annually with the T3 return, even if there are no changes from the prior year. The Notice of Assessment for the prior year is needed to determine if “No” is to be selected in Part A. The Notice of Assessment indicates if the Schedule 15 info has been retained by the CRA; selecting “No” will exclude Schedule 15 from being submitted to the CRA, which could result in penalties.
Additionally:
- The information must be submitted using the prescribed form; alternative formats such as Excel, PDF, and XML are not accepted; and
- For trusts with multiple reportable entities, additional Part B sections can be added as needed.
Deadlines and filing requirements
The T3 return and Schedule 15 (if required) must be filed within 90 days after the trust’s tax year-end. For most trusts, this will mean a filing deadline of March 31, 2026, for the 2025 tax year.
In addition, trusts must obtain a trust account number before filing electronically, and supporting documentation (e.g., a trust deed, will, or written summary of the trust arrangement) must be provided upon request.
Penalties for non-compliance
The already robust penalty regime for non-compliance has been further clarified in the August 2025 draft legislation. It specifies that:
- If a trust fails to file a T3 return by the deadline, the late filing penalty will be $25 per day, with a minimum of $100 to a maximum of $2,500 if no tax is owing. If tax is owing, the penalty will be 5% of the unpaid tax plus 1% per month, up to 12 months;
- If a person knowingly or under circumstances amounting to gross negligence fails to file a T3 return for a non-listed trust or makes a false statement or omission regarding said trust, the penalty will be the greater of $2,500 or 5% of the highest fair market value of all property held by the trust at any time in the year;
- An additional penalty may apply in the case of a false statement or omission. This penalty will be equal to the greater of $100 or 50% of the understated tax or overstated credits; and
- Failure to provide a beneficiary’s SIN, BN, or trust number on a T3 slip may result in a $100 recipient identification penalty per omission.
The CRA may grant relief from penalties and interest in cases where circumstances are beyond the taxpayer’s control, but such relief is discretionary and must be requested.
The critical role of CPAs
The new T3 trust reporting requirements represent a significant shift in the compliance landscape for Canadian trusts. While the August 2025 draft legislation provides important clarifications and relief—particularly for bare trusts and small family trusts—it also introduces new complexities and obligations.
CPAs play a critical role in helping clients navigate these changes, avoid penalties, and ensure that all required information is reported accurately and on time. By staying informed and adopting proactive compliance strategies, practitioners can help their clients meet their obligations under the enhanced trust reporting regime.
Shehzel Saif, CPA, TEP, is a senior manager at BDO Canada specializing in income tax, trusts, and succession planning for Canadian owner-managed businesses in various industries.
This article was originally published in the November/December 2025 issue of CPABC in Focus.
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