The Canada Revenue Agency could still broaden certain filing exemptions for bare trusts, but taxpayers should assume there won't be another general filing exemption for 2026.Adrian Wyld/The Canadian Press
Most bare trusts won’t have to file an annual tax and information return under recently enacted legislation that exempts many common arrangements, such as a parent with shared legal title on an adult child’s home.
Nevertheless, the new legislation will still require certain bare trusts to file annual tax returns.
“I wouldn’t just make the assumption that you’re out [of a filing requirement] automatically,” says Dan Dwyer, tax partner at KPMG LLP in Windsor, Ont.
“The more unique your [bare trust] arrangement is, I’d say the more likely the exclusions don’t carve you out.”
Last week, the federal government passed its budget implementation bill, which included revisions to expanded trust reporting legislation. The trust reporting rules were introduced in 2023 as part of broader efforts to target tax avoidance and aggressive tax planning.
However, the original rules caught many everyday bare trusts in which the trustee’s only duty is to distribute property to beneficiaries on demand.
Before the introduction of the trust reporting rules, most bare trusts didn’t have to file an annual tax return, as they generally don’t generate income.
Due to widespread confusion over the filing requirements, the federal government provided a general exemption for bare trusts just before the first filing deadline in 2024, and did the same the following two years. The new rules will begin to apply for trusts with a 2026 year-end.
Under the revised legislation, a bare trust is exempt from filing in these circumstances:
- the legal owners and beneficiaries are the same people, such as when two people own and use a joint bank account;
- all legal owners of a home are related, and the home could be the principal residence of one of the owners, such as when a parent shares title to a home with their adult child who lives in the home;
- someone is the legal owner of a home where their spouse lives, and the home also could be their principal residence, such as when a couple shares a home but only one spouse is on the title.
There are also reporting carve-outs for all trusts with less than $50,000 in assets, regardless of the type of property, and for trusts with less than $250,000 in assets, provided they hold only certain types of assets.
While these exemptions might carve out most bare trusts, some could still have a filing requirement.
For example, a bare trust in which a parent is on title to a home for the benefit of a child, but the child is not also a legal owner, might still have to file.
Cassandra Knapman, manager, national tax centre, at RSM Canada LLP in Toronto, says Canadians might consider seeking professional advice about filing requirements if they have any arrangement in which “the people benefiting from a property are not necessarily the people who own legal title.”
Another example of a bare trust that might still have to file is when an adult child has a joint bank account with a parent to help with administrative tasks, such as paying bills, but isn’t a beneficiary of the account. (However, there may be a filing exemption in this case under one of the asset size exemptions.)
Taxpayers with a bare trust that isn’t eligible for one of the filing exemptions should start gathering beneficial information as soon as possible, Ms. Knapman says, even though the filing deadline for trusts with 2026 year-ends isn’t until March 31, 2027.
“If you have a complicated trust with lots of people involved, it could take time to get all that information together,” she says.
While the Canada Revenue Agency could still issue guidance that might broaden certain filing exemptions, taxpayers should operate under the assumption that the government will likely not provide another general bare trust filing exemption for 2026, she says.