Bare Trust T3 Reporting: CRA Grants Relief for 2023

In what became one of the most dramatic last-minute tax developments of the 2024 filing season, the Canada Revenue Agency announced on March 28, 2024, that it would not require most bare trusts to file a T3 trust income tax and information return for the 2023 tax year. The announcement came days before the April 2, 2024 T3 filing deadline and reversed what had been a firmly stated and much-discussed new obligation — one that would have required hundreds of thousands of Canadians holding property in informal trust arrangements to file a return for the first time.

1. What Is a Bare Trust?

A bare trust, in the legal and tax sense, is a trust arrangement in which the trustee holds legal title to property on behalf of a beneficiary, but the trustee has no independent powers, discretion, or responsibilities beyond following the beneficiary's instructions. The beneficiary retains full beneficial ownership and effective control over the property — the trustee is essentially a nominee.

In practice, bare trust arrangements are extremely common in Canada and often arise informally, without formal trust documentation. Common examples include:

• Joint bank accounts: A parent and adult child hold a bank account jointly, but the account is effectively the parent's alone. The child holds legal title jointly but is a bare trustee for the parent's beneficial interest.
• Parent-child property ownership: A parent adds an adult child to the title of their home to facilitate estate planning or mortgage qualification, but the parent retains the entire beneficial interest. The child is a bare trustee.
• Nominee corporate arrangements: A corporation holds real property as a nominee for its shareholders, or an individual holds title as agent for a corporation.
• Informal family arrangements: Any informal arrangement where one person holds an asset in their name but the real owner is another person — such as holding shares in a company on behalf of a family member.

What distinguishes a bare trust from other trust types is the passivity of the trustee. In a discretionary family trust, the trustees have active powers to distribute income among beneficiaries. A bare trustee simply holds title and has no active role beyond conveying the property when instructed.

2. The New T3 Filing Rules — Background

Prior to changes introduced through the 2022 federal budget (legislated through Bill C-32), trusts with no income, no capital gains, and no distributions in a year were generally exempt from filing a T3 return. This created a significant information gap: CRA had virtually no visibility into the existence of bare trusts, informal nominee arrangements, or other trust structures that were not generating taxable income.

The new rules, effective for trust taxation years ending after December 30, 2023, eliminated this "nil return" exemption for most trusts. Under the amended subsection 150(1.2) of the Income Tax Act, trusts that had previously been exempt from filing were now required to file if they had:

• At least one trustee who is a resident of Canada
• At least one beneficiary who is a Canadian resident individual, corporation, or trust

Critically, the new rules also required trusts to disclose in Schedule 15 of the T3 return the identity of all trustees, beneficiaries, and any person who has the ability to exert influence over trustee decisions. For bare trusts, this meant the nominee and the beneficial owner would both need to be disclosed, effectively making CRA aware of the informal arrangement for the first time.

The penalty for failing to file a required T3, or failing to complete Schedule 15, was significant: $25 per day, up to $2,500 per return, with enhanced penalties of up to $500 per day (maximum $25,000) for intentional or grossly negligent failures.

3. The 2023 Administrative Relief

As the April 2, 2024 T3 filing deadline approached, it became clear that the practical burden of the new bare trust rules on ordinary Canadians was far greater than originally appreciated. The requirement captured millions of routine arrangements — joint accounts between spouses, parents on a child's mortgage, grandparents holding assets in the grandchildren's names — that had never before involved any trust filing obligation.

CRA announced on March 28, 2024 that it would not impose penalties for bare trusts that did not file a T3 return for the 2023 tax year, unless CRA reached out directly to the specific trust and requested that it file. In effect, bare trusts that filed nothing for 2023 would face no consequences. Trusts that had already filed T3 returns for 2023 could not retroactively un-file them, but those returns would still be processed normally.

4. What Changed for the 2024 Filing Year

Following the backlash over the 2023 bare trust rules, the federal government consulted on how to reform the trust reporting requirements before reintroducing them for 2024. The revised rules that returned for the 2024 tax year include a set of explicit exceptions designed to exclude the most routine informal arrangements that had been captured by the original legislation.

For the 2024 tax year (T3 returns due in spring 2025), bare trusts are exempt from the T3 filing requirement if all of the following conditions are met:

• The only trustee and the only beneficiary are the same individual (e.g., a person holding property in their own name for themselves)
• The trust was created solely because of a legal requirement — such as a joint account required to facilitate a transaction — and is not part of any tax or income planning arrangement
• The fair market value of the trust property does not exceed $50,000 and the only assets are cash, GICs, or listed securities

Where those narrow conditions are not met, the T3 filing obligation and Schedule 15 disclosure requirement applies to bare trusts for 2024 and subsequent years.

5. Who Still Needs to File: Common Scenarios

Despite the exceptions, many common bare trust arrangements will still be subject to T3 filing requirements. Understanding whether your situation requires filing is an important step in 2024 tax planning.

Arrangement	Filing Required for 2024?
Parent on title of adult child's home (mortgage helper)	Generally yes — the exceptions do not apply to real property arrangements
Joint bank account exceeding $50,000	Generally yes — exceeds the value threshold
Adult child on title of parent's home (estate planning)	Generally yes — real property not within exemption
Joint account under $50,000 with only GICs	May qualify for exception — confirm based on specific facts
Nominee holding real estate for a corporation	Yes — not exempt

6. Planning Steps for Affected Bare Trust Holders

The bare trust reporting requirements represent a permanent shift in CRA's approach to trust transparency. The 2023 relief was a one-time administrative concession, not a policy reversal. Going forward, Canadians holding property in bare trust arrangements need to:

• Identify all bare trust arrangements: Review all situations where you hold or have held property jointly with others, as a nominee, or on behalf of family members. Consider whether any of these constitute a bare trust.
• Assess the filing obligation: Apply the 2024 exemption criteria to each arrangement to determine whether a T3 return is required.
• Consider whether to restructure: In some cases — particularly where the bare trust was created for administrative convenience and no longer serves a purpose — winding up or restructuring the arrangement may be preferable to ongoing annual T3 compliance.
• File T3 returns with Schedule 15: For arrangements that require filing, the T3 and Schedule 15 must be filed by the applicable deadline (90 days after the trust's year-end, which for calendar-year trusts is March 31).
• Maintain records: Keep documentation of the nature of the trust arrangement, the identities of trustees and beneficiaries, and the fair market value of assets held throughout the year.

Our tax professionals at Swift Accounting assist clients in identifying and assessing bare trust arrangements, preparing T3 returns and Schedule 15 disclosures, and evaluating whether restructuring is advisable. If you have an informal property-holding arrangement and are unsure of your filing obligations, contact us at (403) 999-2295 or mailbox@swiftltd.ca.