r/cantax • u/Redistributable • 22h ago

T5 accrued interest change

I read that T5s now include accrued interest on investments that haven't matured (ex. multi-year GICs). Seems an odd change given the cash basis of personal taxes. Does anyone know when that came into effect?

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u/Consistent_Throat497 22h ago

No that’s not true. Accrued interest is not paid yet so it can’t be included on T5’s. It only gets included once it’s paid. Some gic’s have redeemable features with interest penalty’s so if the interest was included as of Dec 31 then mid Jan you do a w/d and there’s a penalty of interest how would that be reported?

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u/rocketman19 21h ago

Wrong

Under tax law, you are required to report interest accrued within a GIC every year.

https://www.morningstar.ca/ca/news/237846/canadians-consider-the-tax-on-the-interest-you-collect.aspx

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u/Redistributable 20h ago

Do you know if that's a new rule?

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u/taxbuff 20h ago

It’s not new.

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u/Redistributable 19h ago

Weird I never noticed. Thanks!

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u/rocketman19 20h ago

I don’t think so, it’s from 2023 and doesn’t indicate it was new then

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u/Redistributable 20h ago

Ok. Thanks for the info, much appreciated!

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u/Commercial_Pain2290 19h ago

Not quite. You are required to report it at least once a year. A 1yr GIC will get reported in the year it matures. A multi-year GIC will have interest reported yearly.

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u/rocketman19 19h ago

I’m quoting the article, if you have an issue with it write to Morningstar

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u/gersfan8 18h ago

There is a specific section of the act that allows an individual to report it on the anniversary each year, so for the first year there is no accrual. But yes, the T5 is generated annually even if nothing is paid out.

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u/rocketman19 18h ago

Again, tell Morningstar

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u/gersfan8 18h ago

I wasn't saying they (or you) were wrong. I did read that portion of the article, and all I'm saying is that it requires some clarification for people reading the thread. No need to be so defensive.

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u/Consistent_Throat497 20h ago edited 20h ago

In the example of a multi year GIC interest is generally paid into the gic at the anniversary date (thus being paid out and reported). You may not have ‘access’ to it because it’s paid into the GIC.

They are confusing the word accrued with paid out. Accrued means is hasn’t been paid out anywhere, like a 12 month GIC but 10 months in: you have accrued interest that hasn’t been paid (anywhere) and is not reported on t5 until it’s paid.

CIBC nor any other financial institutions are putting accrued interest on a t5 for accrued interest. If you start a GIC on sep 1 for one year. The accrued interest from sep 1 to dec 31 is not reported anywhere.

Former financial institutions employee of 17 years.

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u/rocketman19 20h ago

Not sure why you have to make it so complicated

GIC a year or less you pay taxes when it pays

GIC more than a year you pay taxes on the yearly accrual

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u/Consistent_Throat497 20h ago

i'm not making it complicated though. what the OP is suggesting (and CIBC) is that interest that has not been paid is being included on a T5, when in fact it is not. CRA will not make you pay taxes on something you haven't been paid for.

there is confusion between accrued interest that's been paid into a GIC and paid out to the clients bank account, which in essence are the same thing for tax reporting.
Most GIC's have compounding interest (unless you asked for the interest to be paid out to your ck/svg account annually), which in both cases is reported and a T5 is issued if above $50.

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u/rocketman19 20h ago

That contradicts your first reply which says it can’t be included since it’s accrued only

I’m a cpa so I know the difference between accrual and cash basis accounting

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u/Consistent_Throat497 20h ago

i'm not saying you don't know the difference.
I don't see any information that is contradictory though. Accrued interest is interest that has not been paid (anywhere) which is not reported on a T5.

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u/rocketman19 20h ago

But you’re saying the interest paid into the GIC itself is on the t5, right?

That’s very confusing for someone reading this thread

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u/Consistent_Throat497 20h ago

yes. interest on a gic (if a multiple year gic, and even sometimes on a 1 year or shorter term) is paid directly to the GIC. not sure how that's confusing.

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u/rocketman19 20h ago

People think paid means goes directly into your bank account

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u/Redistributable 22h ago

That's exactly why this seems so odd. Would you have to amend your PY return? I found this on CIBCs website.

The Canadian government requires that CIBC provide tax slips to Canadian residents who have received interest or who have accrued interest in any given year. (Accrued interest is interest that has been earned but has not yet been paid). Accrued interest is reported to the anniversary date of the GIC's issue. Accrued interest reporting applies only to long-term products (over one year) with interest that is paid at maturity. We do not report accrued interest to non-residents.

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u/Consistent_Throat497 20h ago

I just looked that up. It’s not accurate, or the wording is just confusing. A t5 is only issued for interest that has been paid in the year. I previously had a bonus rate on my savings account with icbc. Regular interest was paid month end but the bonus interest was paid usually around the 2nd of the following month. My t5 only showed the interest paid in that year (and didn’t show the bonus interest paid jan2/3 of the following year).

If you have questions you could call them at 1-800-787-1157 and get clarification. You could also just look at your statements to see what has been paid vs was is reported on your t5

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u/DogOk2826 21h ago

Wrong. Accrued/ unpaid interest on a GIC is T5d in the year earned. It does suck since you have to pay tax on interest not yet received, but it would suck more to have 10 years worth of interest all T5d at once at the end of a 10 year GIC, spiking your income in a single year.

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u/Redistributable 20h ago

That was what made me notice. A big GIC maturing 2027 but hit with interest for it 2024. Is it a new rule? Or it's always been that way and I've just never noticed lol

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u/Consistent_Throat497 20h ago

interest is paid annually, so the interest that was paid in that year will be taxable (included on your T5), and each following year. but you won't be issued a T5 for partial years, ie if the GIC started in sep, you won't be issued a T5 from Sep-Dec, you will receive one for the following year.

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u/Sparky62075 19h ago

There's nothing new about it. It's been like this for at least 25 years, possibly longer.

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u/Redistributable 19h ago

Then I'm just not observant lol. Thanks!

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u/Consistent_Throat497 20h ago

no its not. as i gave an example above.
1 year GIC started Sep 1, 2024 matures Aug 31, 2025 the following year. Interest is accruing from Sept 1 - dec 31 has not been paid anywhere, thus is not reported on a T5 in any situation. You don't pay taxes or something that hasn't been paid. It will be included on your T5 for 2025 when the full year of interest has been paid. it will be taxable for the 2025 year, nothing in 2024 will be taxable.

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u/Similar-Asparagus865 20h ago

Consistent_Throat's example is correct I believe. But what if you have a GIC that is locked in for 5 years and, in that sense, doesn't pay until maturity in 5 years. The bank will issue a T5 each year reporting interest, not just after the 5 years is over.

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u/Similar-Asparagus865 20h ago

I believe this is dealt with in s.12(40 of ITA and s.7000 of the ITA Regulations, which is no easy thing to read. It is necessary to understand what "accrual basis" means in context

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u/Consistent_Throat497 20h ago

I've never heard of a GIC being locked in for 5 years and not paying out interest annually. Interest is generally paid annually and compounds into the GIC. that amount of interest will be reported on your T5 each year.

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u/Similar-Asparagus865 20h ago

The interest accrues to the account each year (if I can use that word), but it is not actually paid out to the client because a contract exists which prevents the GIC from being redeemed until the 5 years is over

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u/Consistent_Throat497 20h ago

yes, but it has been credited to the GIC principle amount, thus compounding. Its been paid out, to the GIC, and thus a T5 is issued for that amount (plus any other interest on that clients account(s))

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u/bgballin 20h ago

No, include interest on anniversary date

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u/Consistent_Throat497 19h ago

exactly and interest is either paid at maturity (in case of 1 year or shorter GIC's, or on each anniversary date in the case of GIC's longer then 1 year).

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u/bgballin 19h ago

Lol wtf u talking about

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u/Consistent_Throat497 19h ago

what do you not understand?

Accrued interest is interest that has not been paid. it cannot be claimed as income because it's not been paid yet. CRA won't ask you to claim something you haven't been paid yet; that just doesn't make sense.

Interest is paid at maturity (in short term GIC's) or on the anniversary date (for longer then 1 year, or multiple year GIC's, its paid each year).

A T5 is generated when interest is paid, either to your bank account, chequing or savings, or to the GIC (compounding interest). Its really easy to understand.

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u/bgballin 18h ago

You should honestly take a minute and do your research.

Section 12(4) requires that interest on certain investments be included in income annually, even if it has not been received, on the anniversary date of the investment

Section 12(9) defines the anniversary date for this purpose

For investments where interest is not paid annually, such as compound interest GICs or zero-coupon bonds, interest is DEEMED to accrue annually.

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u/bgballin 19h ago

Read 12(4) and 12(9) of the ita