Federal Budget 2025: Other Measures

Bare Trust Filings

Historically, a trust was required to file a T3 income tax return only if it met one of a number of parameters, and certain arrangements commonly referred to as bare trusts were excluded from the definition of trusts, and thus from filing requirements, entirely.

Effective for trust years ended December 31, 2023 or later, further requirements were added for a trust to be excluded from the filing requirements, new requirements to disclose substantial information regarding a trust’s settlors, trustees, beneficiaries and certain other persons were added (filed on Schedule 15 ) and bare trust arrangements were also required to file.

Due to concerns that bare trust arrangements were extremely common, and often not recognized as trust arrangements by their participants, significant media attention focused on the administrative burden the obligation to file returns for bare trusts imposed on Canadians in late 2023 and early 2024. CRA waived the filing requirements for bare trusts first for 2023, shortly before the filing deadline, and again for 2024, five months before the filing deadline.

Draft legislation to modify these requirements was released on August 12, 2024. On August 15, 2025, revised draft legislation and explanatory notes were released. Neither of these proposals was ever tabled as a Bill. While these proposed measures would reduce the bare trust arrangements for which filings would be required, many common arrangements would still require T3 income tax returns to be filed, leaving a considerable administrative burden.

Budget 2025 confirmed that the government intends to proceed with the August 15, 2025 proposals, subject to further modifications for consultations and deliberations since their release. However, the application date for reporting by bare trusts would be deferred to apply to taxation years ending on or after December 31, 2026, and not require such filings for the 2025 taxation year.

Avoiding the 21-Year Deemed Disposition Rule for Trusts

Trusts are generally deemed to have disposed of their property for fair market value proceeds on the 21st anniversary of their creation, and every 21st anniversary thereafter (the “21-year rule”). Where property is transferred by a trust on a tax-deferred basis to a new trust, a rule prevents the avoidance of the 21-year rule. This rule prevents transactions that would indefinitely postpone tax on accrued gains. However, certain tax avoidance planning techniques have been used to avoid both the 21-year rule and the anti-avoidance rule. For example, this planning may involve transferring trust property on a tax-deferred basis to a beneficiary that is a corporation owned by a new trust.

Budget 2025 proposed to broaden the current anti-avoidance rule for direct trust-to-trust transfers to include indirect transfers of trust property to other trusts. This measure would apply in respect of transfers of property that occur on or after November 4, 2025.

Non-profit Organizations’ (NPO) Reporting Obligations

The Government stated that it intends to proceed with proposed expansions to the existing reporting requirements for NPOs by requiring basic filings for smaller NPOs not otherwise required to file and adding regular filing requirements for entities with receipts over $50,000. However, this would be deferred to apply for taxation years beginning on or after January 1, 2027 rather than commencing for 2026. The government is reviewing the feedback it received from consultations with stakeholders and will release final proposals in due course with the objective of minimising any additional administrative burden and clarifying which organizations are, or are not, subject to the new requirement.

Various Other Matters

Budget 2025 proposed several other measures, including the following:

  • A 2-year pilot project would be conducted to assess whether EI eligibility and entitlement can be determined accurately and securely using real-time payroll information.
  • Claimants receiving EI parental benefits would be eligible for an additional eight weeks of parental benefits in the event of the death of the child.
  • Temporary flexibility would be provided in respect of the EI Work-Sharing program, as announced on March 7, 2025, to provide benefits to eligible employees who agree to work reduced hours due to a decrease in business activity beyond their employer’s control.
  • Temporary EI measures that enhance income supports for Canadian workers whose jobs have been impacted by the economic uncertainty caused by foreign tariffs would be provided.
  • The Canada Labour Code would be amended to restrict the use of non-compete agreements in employment contracts for federally regulated businesses, with consultations beginning in early 2026.
  • $97 million would be provided over five years, starting in 2026-27, to establish the Foreign Credential Recognition Action Fund to work with the provinces and territories to improve foreign credential recognition, with a focus on health and construction sectors.
  • Legislation would be introduced to regulate the issuance of fiat-backed stablecoins in Canada.
  • Limits to access the informal procedure in the Tax Court would be reviewed.
  • The Proceeds of Crime (Money Laundering) and Terrorist Financing Act would be modified to restrict the acceptance of: cash deposits from one person into the account of another person; and a cash payment, donation or deposit of $10,000 or more.

Budget 2025 also noted that a comprehensive expenditure review was conducted to identify ways to reduce annual spending on an organization-by-organization basis, intended to result in more than $9 billion in savings annually. For example, spending would be reduced in CRA by winding down initiatives such as the digital services tax, the federal fuel charge and the Canada carbon rebate and the underused housing tax. Further, artificial intelligence (AI) and process automation would be used to reduce labour needs in compliance and collection activities.