The 2024 amendments to the Income Tax Act, largely enacted through Bill C-59, significantly expanded CRA's audit and information-gathering authority. For Canadian businesses — particularly mid-size private companies and professional corporations — these changes mean more intrusive audits, stricter documentation demands, and reduced ability to delay or limit CRA's access to business records.
CRA now has explicit authority to issue written demands requiring taxpayers to answer specific questions in writing, within a stated timeframe, under penalty of up to $25,000 per day of non-compliance. Previously, CRA relied primarily on in-person interviews or document requests. The new written demand power allows CRA to require detailed written explanations of transactions, business arrangements, and tax positions without arranging a meeting.
The questions in a written demand can be broad — covering the purpose, participants, legal basis, and tax effect of transactions going back several years. Responses must be complete and accurate; providing misleading or incomplete answers can itself be an offence.
For large corporations — generally those with assets exceeding $250 million or annual revenues over $100 million — CRA has been given extended timelines to complete audits and reassess returns. The normal three-year reassessment period can be extended where CRA can show that additional time is needed to review complex transactions or obtain foreign information.
For transactions involving non-arm's-length parties, related foreign entities, or complex restructurings, the practical reassessment window has effectively expanded. This means records from transactions well in the past may still be needed to defend positions on open audit files.
CRA's power to audit not just the taxpayer but third parties involved in transactions has been strengthened. Accountants, lawyers (subject to privilege), financial advisors, and promoters of tax arrangements can be required to produce documents and answer questions about their clients' transactions — without the client's knowledge or consent.
This is particularly significant for tax shelter arrangements and complex planning. CRA can use information gathered from advisors to build a case before the taxpayer is formally notified of an audit.
The 2024 amendments increased penalties for failing to comply with CRA information demands. The penalty structure is now:
| Non-Compliance Type | Penalty |
|---|---|
| Failure to file required return | $25/day, min $100, max $2,500 |
| Failure to answer written demand | Up to $25,000/day |
| Obstruction of CRA officer | Criminal charges; fines up to $25,000 |
| Failure to maintain records | Fine up to $10,000 per failure |
The basic requirement to retain business records for six years from the end of the last tax year to which they relate remains in place. However, for businesses under audit, records must be retained until the audit and any appeals are fully resolved — even if that extends beyond the normal six-year period. CRA can require formal permission before a taxpayer destroys records that might be relevant to an open audit.
Digital records are increasingly the standard. CRA expects electronic records to be maintained in their original format and to be searchable and exportable. Recreating records in a different system, or converting them to PDF without retaining the original database, may not satisfy CRA's requirements.
CRA audits of Calgary businesses are increasingly sophisticated, data-driven, and focused on specific high-risk areas identified through CRA's compliance analytics. Professional representation throughout an audit — from initial response through document production and settlement negotiations — protects your rights and typically produces better outcomes than going it alone. Our tax professionals manage CRA audits for clients across industries. Contact us at the first indication of CRA audit activity.