Can a natural disaster or serious illness be grounds for CRA to cancel penalties and interest?

Yes. A natural disaster or a serious personal illness are both recognized categories of circumstances CRA considers under the Income Tax Act's taxpayer relief provisions when deciding whether to cancel or waive penalties and interest. This fits the general framework of the relief provision, which is built around circumstances genuinely beyond a taxpayer's control affecting their ability to meet their tax obligations on time.

As with other taxpayer relief categories, though, this is still a discretionary request rather than an automatic entitlement just because a disaster or illness occurred during the relevant period. CRA generally wants to understand the specific connection between the circumstance you're describing and your actual inability to file or pay on time, so supporting documentation, medical records for an illness, or evidence of how a disaster affected you specifically, such as displacement or property damage, strengthens a request considerably more than simply stating that one of these events happened. If a natural disaster or serious illness affected your ability to meet a tax obligation, gathering that kind of supporting evidence as part of your relief request, rather than relying on a general description of what happened, gives CRA what it needs to properly assess your situation.