Draft Budget Implementation Legislation: Part II, Updated Reporting Requirements for Trusts

  • August 31, 2022
  • Terrance S. Carter, Theresa L.M. Man and Jacqueline M. Demczur


The disbursement quota is expected to soon be increased, as first announced in Budget 2022. Two pieces of draft legislation – one to make technical amendments to the Income Tax Act (“ITA”) and Income Tax Regulations (“Regulations”), and one to implement parts of Budget 2022, among other proposals, by amending the ITA and Regulations – has been released.[1] In particular, the draft legislation proposes changes to the disbursement quota (“DQ”), trust reporting, technical updates regarding filing returns, as well as listing of prescribed donees. The draft legislation was released by the Department of Finance on August 9, 2022, together with explanatory notes.[2] It is expected that the proposed changes will appear in budget implementation legislation to be introduced in the House of Commons when Parliament resumes in September 2022. This article, which is Part II of a Three-Part series, will updated reporting requirements for trusts.

Updated Reporting Requirements for Trusts

There may soon be changes to the reporting requirements for trusts in Canada if the draft legislation comes into force. As previously covered in the February 2022 Charity & NFP Law Update,[1] Finance Canada had released a set of draft legislative proposals and accompanying explanatory notes on February 4, 2022, with proposed changes requiring more trusts to file a return of income (“T3”). Those changes were originally proposed in the federal budget of February 27, 2018, and contained draft legislation and regulations released on July 27, 2018. Then the same changes were released on February 4, 2022, where the implementation of the proposals is deferred by one year, applicable to taxation years ending after December 31, 2022, instead of the December 31, 2021 taxation year as previously proposed. Those February 2022 proposed changes are again contained in the draft legislation released on August 8, 2022, with some minor changes in the recent draft legislation.