Jun 17, 2026
Most Canadians who receive a document request from the Canada Revenue Agency (CRA) during an audit assume they have room to respond at their own pace. Under current law, the CRA must go to the Federal Court to compel compliance — a process that is slow and expensive (and rarely triggered by ordinary taxpayers).
This is about to change.
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Bill C-31, a federal budget implementation bill that passed first reading in the House of Commons on May 6, 2026, would give the CRA authority to issue a Notice of Non-Compliance (NoNC) against any taxpayer who fails to satisfy an audit information request — and to start charging $50 per day from the moment that notice is issued.
The bill has not yet received Royal Assent. But tax lawyers say it is likely to pass with relatively few changes, and they are already advising clients — particularly incorporated business owners, self-employed professionals and investors with offshore or crypto holdings — to review their document-retention practices now, before future audits are triggered.
What Bill C-31 actually proposes — and the new powers of the CRA
Under the proposed legislation, the CRA can issue a Notice of Non-Compliance (NoNC) at any time it determines a taxpayer has not fully satisfied a demand for information or documents — without needing a court order first.
Removing the need to seek a court ruling is the biggest change proposed by Bill C-31. That’s because the process, as it currently stands, forces the CRA to apply to the Federal Court for a compliance order, satisfy a judge that the requirement has been met under section 231.7 of the Income Tax Act before a judgment is issued. It’s a process that is slow and costly — for both sides. The new legislation would replace this judicial threshold with a ministerial one — allowing the CRA to decide and act, on its own.
“Once the legislation is enacted, it would create a new intermediate enforcement tool that the CRA does not currently have,” Pooja Mihailovich, a partner with Blake, Cassels & Graydon LLP, explained in a May 2026 analysis. The CRA could “impose immediate procedural and financial consequences without first obtaining a court order.”
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One amendment was dropped
One controversial element from the 2025 draft of Bill C-31 was dropped: Giving CTA the power to compel taxpayers to answer questions under oath or affirmation. That removal is “a welcome development,” according to Blake, Cassels & Graydon LLP tax lawyers Mihailovich and Erich Schultze.
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New powers and new penalties: What the CRA can do once Bill C-31 is passed
Bill C-31 introduces two separate penalty mechanisms, and understanding when each kicks in is essential for any taxpayer who could face an audit.
Penalty 1 — The daily NoNC fine. As soon as the CRA issues a Notice of Non-Compliance, a $50-per-day penalty begins accruing — up to a maximum of C$25,000. The penalty runs until the CRA is satisfied that the taxpayer has complied or has done everything reasonably necessary to comply. There is a review process, where the taxpayer can request a ministerial review within 90 days, and the Minister must respond within 180 days. If the Minister does not respond in time, the notice is deemed vacated.
Penalty 2 — The compliance order surcharge. If the CRA escalates to Federal Court and obtains a compliance order, an additional penalty of exactly 10% of the aggregate tax owed applies for each year covered by the order — but only if the tax owed in at least one of those years exceeds $50,000. Earlier draft legislation had capped this penalty using “up to” 10%, but the final bill removes that ceiling, making the 10% figure a fixed rate.
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According to analysis from Blake, Cassels & Graydon LLP, there is one important protection for everyday financial professionals in the proposed bill: when the CRA seeks information about an unrelated taxpayer from a third party — such as a bank, financial adviser or tax preparer — it must first obtain a compliance order before issuing a notice of non-compliance to that third party.
Who is most at risk with the proposed Bill C-31?
The proposed legislation does not target any specific type of taxpayer. According to Gergely Hegedus, a tax partner at Dentons in Edmonton, it “could be a corporation or an individual or a charity.” But the practical risk is not evenly distributed.
Mihailovich, a partner at Blake, Cassels & Graydon LLP, notes that “large corporations and multinational enterprises will likely feel the impact most acutely” because they are subject to more frequent and extensive audit activity. But, she cautions, the CRA’s powers are “drafted broadly” and “the practical reach will extend well beyond multinationals.”
Based on the structure of the penalties, the groups most exposed in the near term include:
- Incorporated professionals and small business owners who are already subject to CRA audit activity or who keep complex or offshore-linked records
- Self-employed Canadians whose records span multiple years and who may not have a clear document-retention system
- Cryptocurrency investors, who may hold records across multiple platforms or wallets that are not neatly organized
- Canadians with foreign assets or income, who face additional scrutiny and whose records may involve third parties abroad
To be clear, the compliance order penalty — the 10% surcharge — only activates when taxes owed in at least one covered year reach $50,000 or more. That makes it a targeted risk for higher-income earners and incorporated businesses rather than most individual tax filers.
What to do before Bill C-31 receives Royal Assent
The bill has not yet passed. But the window between first reading and Royal Assent is the right time to get organized — not after an audit request lands in your inbox.
As Ryan Minor, tax director with the Chartered Professional Accountants of Canada (CPA Canada) in Sudbury, Ont., explains: The NoNC is “a pretty big stick.” The daily accrual structure means even a brief delay in responding — say, gathering records while travelling or waiting on a third party — can add up to thousands of dollars in penalties before a single fact is disputed.
To illustrate, let’s assume a taxpayer receives a NoNC and takes 250 days to resolve the dispute. That taxpayer would accumulate the full $25,000 penalty, regardless of whether they ultimately owe any additional tax. And that penalty does not reduce or offset whatever tax the audit may subsequently reveal.
Up until now, the CRA audit process has been one where time was largely on the taxpayer’s side. If passed, Bill C-31, flips that dynamic. Slow responses will cost money — in addition to tax owed.
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Romana King, Senior Editor at Money.ca, also writes for various North American publications and the RKHomeowner blog. Her book, House Poor No More, is an Amazon bestseller and five-time award winner, including the 2022 New York CPA Society's Excellence in Financial Journalism (EFJ) Book Award.
