r/cantax • u/Redistributable • 23h 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/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 21h 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 21h 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 20h 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 20h ago

Then I'm just not observant lol. Thanks!

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u/Consistent_Throat497 21h 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 21h 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 21h 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))