What Is The Normal Reassessment Period?
The normal reassessment period, as defined by subsection 152(4) of the Income Tax Act (Canada), refers to the timeframe within which the Canada Revenue Agency (CRA) can audit and reassess a taxpayer’s return to adjust income, deductions, or tax payable.
After this period expires, the CRA cannot reassess a tax return unless it shows that the taxpayer made a misrepresentation attributable to carelessness, neglect, or willful default.
Under the Excise Tax Act (Canada), the relevant provision is subsection 298(1).
1. Normal Reassessment Period for Different Taxpayers
| Type of Taxpayer | Normal Reassessment Period |
| Individuals (T1 Returns) | 3 years from the date of the initial Notice of Assessment (NOA) |
| Canadian-Controlled Private Corporations (CCPCs) | 3 years from the date of the initial NOA |
| Other Corporations (e.g., public companies, foreign-controlled corps) | 4 years from the date of the initial NOA |
| GST/HST Returns | 4 years from the filing due date |
For example, if an individual files their 2022 tax return and receives a Notice of Assessment on May 1, 2023, the CRA has until April 30, 2026 (3 years) to reassess the return.
2. Exceptions to the Normal Reassessment Period
Under subparagraph 152(4)(a)(i) of the Income Tax Act (Canada) or subsection 298(4) of the Excise Tax Act (Canada), if the CRA can show that a taxpayer made a misrepresentation attributable to carelessness, neglect, or willful default, then there is no time limit—the CRA can reassess at any time.
Unfortunately for taxpayers, the Tax Court of Canada has interpreted this section broadly, and the legal threshold for the CRA to prove “misrepresentation” is very low. As such, almost any mistake or omission on a tax return has been considered a “misrepresentation” that allows the CRA to issue reassessments beyond the normal reassessment period.
3. Disputing a Reassessment Outside the Normal Reassessment Period
In order for the CRA to reassess a taxpayer pursuant to 154(4)(a)(i), it must do the following:
- Establish that there was a misrepresentation; and,
- Prove that the misrepresentation resulted from the taxpayer’s carelessness or neglect.
The CRA bears the burden of proving both factors noted above. The Federal Court of Appeal has stated:
Although the Minister has the benefit of the assumptions of fact underlying the reassessment, he does not enjoy any similar advantage with regard to proving the facts justifying a reassessment beyond the statutory period… The Minister is undeniably required to adduce facts justifying these exceptional measures. [1]
A taxpayer can challenge a reassessment outside the normal reassessment period by arguing:
- No misrepresentation was made when the tax return was filed.
- The taxpayer had an honest but incorrect belief that their reporting position was correct.
- The taxpayer acted as a reasonable and prudent person would have in the same circumstances.
The taxpayer relied on a tax professional to ensure compliance with the Income Tax Act (Canada) or the Excise Tax Act (Canada).
References
[1] Lacroix, [2009] DTC 5625 at para 26