Federal Court Sends a Newcomer Couple's Foreign-Property Penalties Back to the CRA

A June 2026 Federal Court decision has ordered the CRA to take a second look at the late-filing penalties it charged a newcomer couple over Form T1135, the disclosure required when a Canadian resident holds specified foreign property costing more than $100,000, as reported in a July 8 Financial Post column by tax columnist Jamie Golombek. The couple did not know the form applied to them. For business owners who moved to Canada with assets abroad, the case is a reminder that these penalties build quietly, and unresolved CRA balances surface fast once a financing file lands in front of a lender.

A form about property cost, not income

The couple's mistake was a common one. Per Golombek's column, they believed the T1135 applied only to foreign income over $100,000, when the actual trigger is foreign property whose total cost is more than $100,000. The CRA's guidance for the form counts foreign bank accounts, shares of non-resident corporations, and other holdings outside Canada among the assets that must be reported. Personal-use property and property used in an active business are excluded.

The form is due with the income tax return, April 30 for most individuals and June 15 for the self-employed. There is an exemption for the year a person first becomes resident in Canada, but it did not help here: the column notes the couple had been Canadian residents a decade earlier, which cost them the exemption.

The penalty math

The couple filed the missing forms in April 2022 and received a reassessment dated June 1, 2022, charging $2,500 per late form per year. That figure comes straight from the statute. Subsection 162(7) of the Income Tax Act sets the late-filing penalty at the greater of $100 and $25 a day for up to 100 days, which caps at $2,500 per form, plus arrears interest. Golombek notes the numbers climb where the CRA finds gross negligence, at $500 a month to a maximum of $12,000.

What the court said

The couple asked for relief, arguing they had acted in good faith to correct the error and that paying would cause financial hardship. A first CRA review cancelled the penalty and interest for one year; a second upheld the 2019 penalty, reasoning in part that the couple had not acted in a timely way to fix the noncompliance. The Federal Court judge rejected that reasoning. In the decision's words, "This circular form of logic often leads to unreasonable outcomes." The matter now goes back to the CRA for reconsideration by a different officer.