Does a Family Trust Have to File a Tax Return Every Year in Ontario?

Often yes: a trust must file a T3 return if it is a Canadian-resident express trust that is not a listed trust. Listed trusts are generally exempt; past examples were trusts existing under three months or holding no more than $50,000 in assets all year, but the list has changed and that asset test may no longer apply, so check current rules.

A T3 return is due no later than 90 days after the trust's tax year-end. A trust that must file generally must also report beneficial ownership information on Schedule 15. A trust's taxable income is generally taxed at the top personal rate, unless it is a graduated rate estate or qualified disability trust. Late filing costs 5% of any unpaid tax plus 1% per full month late, up to 12 months, or $25 a day (minimum $100, maximum $2,500) where no tax is owing.

The 21-year rule means a trust is generally deemed to dispose of its capital property at fair market value every 21 years. For spousal, alter ego and joint partner trusts, the first deemed disposition happens on a death instead of at 21 years, which for a joint partner trust is the later of the two deaths. An accountant or lawyer can confirm how this applies to your trust.