Specific priorities for audits are continually evolving and are outlined in the Canada Revenue Agency’s departmental plans each fiscal year.Sean Kilpatrick/The Canadian Press
The deadline for filing taxes in Canada for 2026 is April 30. As the big day approaches, Globe Advisor and Globe Investor have teamed up to offer advice on how to maximize returns, find credits and avoid an audit. The full series can be found here.
For high-net-worth Canadians, certain assets, deductions and transactions come with added complexity and reporting requirements – and may be more likely to attract the Canada Revenue Agency’s attention.
Specific priorities for audits are evolving continually and are outlined in the agency’s departmental plans each fiscal year.
In recent years, the agency has focused on unwarranted GST/HST claims, cryptocurrencies and real estate transactions, as well as tax avoidance within the wealthy population and issues relating to non-resident taxpayers.
The CRA said in its departmental plan for 2026-27 that it’s making significant investments in advanced data analytics and AI to optimize compliance processes and identify gaps.
Greg London, partner and domestic tax consulting leader with BDO Canada LLP in St. John’s, says these upgrades have enhanced the CRA’s ability to look at the full scope of an individual’s tax situation rather than just analyzing a single transaction.
“You may start with a personal tax audit, and all of a sudden your corporation is being pulled in, and they’re looking at your corporation and your trust,” he says.
With the amount of data now available, he adds, “any planning you’re doing of any significance – you almost have to assume it’s going to get looked at.”
The CRA also may be conducting more audits – roughly 84,000 compliance actions in 2024-25, compared with almost 69,000 the year before.
Here are a few areas experts say often come up and may lead to scrutiny for high-net-worth clients:
Foreign asset reporting
The requirement for individuals to report assets held offshore is an area that often comes up, says David McCormick, a tax litigator with Legacy Tax + Trust Lawyers in Vancouver.
Taxpayers who hold “specified foreign property,” whether cash or other assets (such as an interest in a non-resident trust or corporation), for which the fair market value exceeds $100,000 at any point in the year, must report it to the CRA via form T1135.
“Usually, there’s no tax consequences for reporting all that information; it doesn’t increase your taxes owing, it’s simply a compliance thing,” Mr. McCormick says.
However, the penalties for non-compliance can be onerous.
“Most of them, in the worst potential scenario, are calculated as a percentage of the value of the assets held offshore,” he says.
Source of funds
In the case of non-resident high-net-worth individuals, Mr. McCormick says he’s seen a steady volume of offshore compliance audits over the past few years, asking about the source of funds received from another jurisdiction.
The most common relates to high-net-worth individuals “who have limited reported income in Canada and who may be receiving large transfers of funds from overseas,” he says.
Most often, the people receiving these transfers don’t have “substantive reporting requirements” in Canada, he adds.
At the same time, it’s important for clients to have a well-documented explanation for the source of funds or the chain of intermediaries used, he says.
Foreign tax credits
With the sale of U.S. property ramping up and some Canadian residents realizing employment income in other jurisdictions, foreign tax credit claims are an area of focus for the CRA, says Dante Rossi, director, tax planning with BMO Private Wealth in Toronto.
“Business income, foreign employment income, sales of foreign real estate properties – those are taxes paid in foreign jurisdictions that you’re claiming credit in Canada to which the CRA doesn’t really have intel on,” he says.
The CRA will examine a client’s documentation to support their credit claims in Canada, he says, “because you’re effectively reducing your Canadian tax liability, and that’s the design of the system. But they want to make sure [of] the integrity of it.”
Business expenses
Whether home office expense claims, vehicle expenses or repeated losses, business expense claims are a perennial audit red flag – especially year-over-year deduction spikes, Mr. Rossi says.
“Home office expenses are always a scrutinized area because it’s quite complicated,” he says. “Different tests are required to be met to claim expenses, and then different types of expenses can be claimed, whereas others are denied, depending on the framework you fit into.”
The CRA is checking for the reasonability and consistency of those expenses, Mr. Rossi says.
For some high-net-worth individuals, luxury assets used for both business and personal purposes will likely be flagged to determine whether they’re deductible – and, if so, whether they should be classified as a capital or expense item, Mr. London says.
“There’s a reinvigorated look at anybody who owns any type of aircraft through companies,” he says, as well as any “large-scale properties that might be multi-use.”