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Chastened, the CRA deferred bare-trust reporting again for 2024 and 2025 while the finance department issued draft amendments in August 2024 and August 2025 to relieve certain trusts — including bare trusts — from filing.

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Those revisions are now law after being folded into the 609-page omnibus that became Bill C-15, which received Royal Assent in March 2026. The new rules apply for most trusts for 2026, with returns due by March 31, 2027.

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The revised rules exempt more arrangements than the original version did, but the exceptions are mind-bogglingly complex, best illustrated through flowcharts and aids and the foundational problem remains: tax preparers are still being asked to assess legal questions they are generally not trained to answer, and that is why the 2023 filing season may prove to be a preview for next year rather than a one-off.

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Complexity in tax law is often unavoidable. The problem is not complexity in the abstract, but who gets caught in it. The design of the legislation can guarantee a wide catch.

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The new trust legislation casts the broadest possible net and then cuts holes in it, a design inherently complex to navigate. The result is that the broader exemptions reduce filings, not effort, and millions must still work through the rules to learn whether a carve-out spares them, even if only a fraction ultimately file.

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The costs for non-compliance are real. A late return runs $25 a day to a maximum of $2,500, and the gross-negligence penalty climbs to the greater of $2,500 or five per cent of the highest fair market value of the trust’s property — payable even where no tax is owing.

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What will the CRA do with the haul? No one in government has answered that. The agency will gather names, birthdates and tax numbers for the trustees, beneficiaries and settlors of the trusts that do file. Will the information serve a purpose proportionate to the cost imposed on taxpayers?

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Scottish economist Adam Smith saw the issue 250 years ago. Among his maxims of taxation was the canon of convenience: a tax should be levied in the manner most convenient for the person paying it.

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Ask a sophisticated taxpayer with a complex structure to navigate complex rules; fair enough. But bare trusts are woven through ordinary life and demand millions of average Canadians resolve questions of trust and agency law under threat of penalties, which is exactly where these rules fail Smith’s test.

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Again, the trouble is not complexity; it is complexity imposed on a broad and unsuspecting audience.

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There were, of course, better options. The original proposal was far narrower before the 2022 amendment pulled bare trusts into the reporting regime, adding unnecessary complexity on a large and unsuspecting audience. Not cool.

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Instead, ordinary families face possible penalties to produce information where it is doubtful the government will put such information to good use. Once again, practitioners will be asked to answer legal questions they were never trained to answer.

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The rules have changed; the day has not. Bill Murray, at least, had a screenwriter.

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Kim Moody, FCPA, FCA, TEP, is the founder of Moodys Tax/Moodys Private Client, a former chair of the Canadian Tax Foundation, former chair of the Society of Estate Practitioners (Canada) and has held many other leadership positions in the Canadian tax community. He can be reached at kgcm@kimgcmoody.com and his LinkedIn profile is https://www.linkedin.com/in/kimgcmoody.

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