The 2011 Ontario budget, delivered by Finance Minister Dwight Duncan on March 29, 2011, contained a budget proposal that will significantly alter the way in which the Ontario Estate Administration Tax (“EAT”) is assessed and collected. The amendments to the Ontario Estate Administration Tax Act, 1998 (the “EAT Act”) announced in the 2011 Budget received Royal Assent on May 12, 2011. Although these amendments will not generally take effect before January 1, 2013, estate trustees and their advisors should be aware of the new tax audit and collection regime and the potentially severe consequences for non-compliance.
The most significant of the amendments to the EAT Act are as follows:
- Applications for certificates of appointment will have to be made on a prescribed information return that, at a minimum, will require the applicant to provide detailed information about the deceased person. The new form and the time period in which it must be submitted, have not yet been announced but is expected that an applicant will have to provide a detailed inventory of the estate’s property and a declaration of the value of each asset.
- Failure to provide the required information, intentionally providing false or misleading information or assisting in the provision of false or misleading information will be an offence punishable by a fine ranging from $1000 to twice the value of the EAT payable and/or up to 2 years imprisonment. Not knowing that a statement or omission was false or misleading will be a defence to the offence, provided the person charged could not have known the statement or omission was false or misleading on the exercise of reasonable diligence.
- The Minister of Revenue will authorize EAT inspectors and give them very broad powers of audit and inspection to administer the EAT. Inspectors will also have the authority to demand that any person, not just the estate trustee, provide information, documents or electronic records related to the administration of the EAT Act.
- Estate trustees will be required to keep records and accounts containing information related to the assessment of EAT.
- The Minister of Revenue may issue an assessment or reassessment of EAT, usually within 4 years of the date the tax became payable (i.e., on application for the certificate of appointment). This limitation period will be extended indefinitely if no information return is filed or if a misrepresentation attributable to neglect, carelessness, wilful default or fraud is made with respect to information provided regarding the estate.
This provision could allow the government to issue a reassessment of additional EAT payable long after estate assets are distributed to the beneficiaries by asserting that there was a negligent or willful misrepresentation about the value of estate assets. It might also permit the government to question the validity of transfers of estate assets to a named beneficiary or surviving spouse and assert that those assets should be subject to EAT.
- The estate representative may object to an assessment or reassessment by filing a notice of objection, within 6 months of the assessment date. The notice of objection must clearly set out the issues, facts and reasons for the objection.
- The government may allow the objection by cancelling the assessment or reassessment, or may vary the amount assessed. If the objection is not allowed, however, further appeals of the assessment or reassessment may be made to the Ontario Superior Court.
- The Minister of Revenue and all Crown employees must maintain confidentiality with respect to information obtained in connection with the EAT Act, subject to limited exceptions related to administration and tax policy.
These new provisions will apply to applications for certificates of appointment made after January 1, 2013 (unless a later date is prescribed).
These changes will impact every Estate Trustee currently named, as well as Estate Trustees to be named in the future. It is becoming even more crucial that a qualified, knowledgeable individual be named or given appropriate authority to ensure that your Business Estate is evaluated, distributed and closed without future impacts to your Trustees or Heirs.
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Until next time,
 Pallett Valo LLP – January 2012 Newsletter