Flaherty shortens income trust filing deadline

Income trust investors will have an easier time filing their annual tax return, thanks to a new federal government draft amendment.

Jim Flaherty, Canada’s minister of finance, announced Wednesday that income trusts would have 60 days — as opposed to 90 — to disclose information relating to distributions and allocations of income and capital. Trusts that invest in other trusts and partnerships have 67 days.

The move means investors will get their T3 form about a month earlier than in the past.

Ian Russell, president and CEO of the Investment Industry Association of Canada, has been working with the government for more than a year to get this amendment on the table. He says more than 50% of Canadians invest in equities, with a large number still investing in income trusts, so the announcement is welcome news.

“It’s a win for the Canadian investor,” he says. “To be able to get timely tax information is really an obligation on the part of corporate issuers and income trusts. That had been a problem before, but this corrects it.”

Under the old rules, income trusts had until the end of March to process their financial information. This meant investors often got their T3 forms late — sometimes after the April 30 personal income tax filing deadline.

Russell says the reason for allowing the industry to file later than the corporate sector was because income trusts were once complicated instruments. “Some business trusts were fairly new instruments and had a very complex cash flow pattern,” he says. “They paid out capital; they paid out interest, paid dividends and income. So I think they had requested a longer filing deadline.”

He says improved technology has helped trusts become more efficient, so the 90-day deadline was no longer necessary.

But could shortening the filing deadline cause trusts — which already have transparency issues — to rush through their accounting practices to the detriment of investors? Russell doesn’t think so, though he admits he needed assurances from the income trust industry that they would be able to meet the 60-day deadline.

“We wanted to ensure that they would have the capabilities to be able to meet the deadline and be able to provide accurate tax information,” says Russell. “Our conversations had indicated they could, and clearly with Ottawa proceeding along these lines, they also believe it can happen.”

This amendment to the Income Tax Act will take effect on Thursday.

Filed by Bryan Borzykowski, Advisor.ca, bryan.borzykowski@advisor.rogers.com