Bill C-31 and the CRA’s New Audit Powers: What Ontario Owner-Managers Need to Do Before First Reading Becomes Law (2026)

Reviewed by Bader A. Chowdry, CPA, CA, LPA on May 31, 2026.

On May 7, 2026, the federal government quietly moved one of the most significant CRA enforcement expansions of the decade from “draft” into a live legislative bill. Bill C-31, Budget 2025 Implementation Act, No. 2, introduced by Finance Minister Francois-Philippe Champagne, contains the long-anticipated expansion of CRA audit and compliance powers that we have been tracking since Budget 2024. Within three weeks the major Canadian tax practices — PwC, Blakes, McCarthy Tetrault, Norton Rose Fulbright, Fasken — had published commentary. Most owner-managers I speak with in Mississauga and the broader GTA have not heard of it yet.

That gap is the problem. The bill changes how a CRA audit feels from the day-one information request onward, and the changes hit hardest at exactly the kind of mid-cap private corporation and not-for-profit organization Insight Accounting CPA serves every day. If you are a CCPC owner with retained earnings above six figures, a charity preparing for a section 149.1 review, or a real estate holdco group routinely papering intercompany loans, you have a narrow window — somewhere between now and the bill’s expected royal assent later in 2026 — to clean up the documentation hygiene that will determine whether the new $50-per-day clock ever starts ticking against you.

What exactly does Bill C-31 change about a CRA audit?

The mechanic that matters most is the new Notice of Non-Compliance (NoNC) under proposed ITA section 231.9. Today, when the CRA asks for records and you stall, the agency has to either drop the request or go to Federal Court for a compliance order. After Bill C-31, an auditor can issue a NoNC unilaterally — no court, no judicial review front-end, no de minimis dollar threshold. The $50-per-day penalty starts running and tops out at $25,000 per notice. There is no requirement that the underlying request itself be reasonable in hindsight, only that the auditor believed the request was unanswered.

How big can the compliance-order penalty actually get?

Bigger than most owner-managers realize. If the CRA succeeds at Federal Court in obtaining a compliance order against you under proposed ITA subsections 231.7(6) to (9), and any single tax year in the order involves more than $50,000 of taxes owing, a fresh penalty of 10% of the taxes owed for each year covered by the order kicks in on top of the daily penalties. For a CCPC with two years of disputed reassessments totaling $400,000 in tax, that is a $40,000 penalty on top of interest, on top of the underlying tax, on top of the daily NoNC accrual.

Does this apply to my accountant, my bank, or my lawyer?

Yes — with one important guardrail. Bill C-31 expressly reaches third parties who hold information about a taxpayer: banks, tax preparers, registered investment advisors, payroll providers, and (subject to privilege) lawyers. The protective rule is that when the CRA targets a third party in relation to an “unrelated person,” it must first obtain a compliance order before issuing a NoNC against the third party. There is also an explicit carve-out where the taxpayer reasonably believes the information is protected by solicitor-client privilege. The corporate-LPA implication for our audit clients is sharp: your CPA-prepared working papers are not privileged, and Insight’s audit files will continue to be discoverable on a properly framed CRA request.

The four changes that matter most for Ontario owner-managers

1. The reassessment clock now stops on you, not on the CRA

Under existing rules, the CRA has three years from the original notice of assessment to reassess a CCPC and four years for non-CCPCs and trusts (longer for unreported foreign income, fraud, or misrepresentation). Bill C-31 amends those rules so that the normal reassessment period is suspended while an information dispute is live — including while a NoNC is outstanding, while a demand for information is under judicial review, or while a contested compliance order proceeds. Practically, that means the audit window can stretch from three years to five, six, or seven years if you litigate. In my experience advising on Section 88 windups and intercorporate dividend planning, this single change is the most underestimated piece of the bill.

2. Unnamed Persons Requirements just got faster

The CRA’s authority to seek information about unidentified taxpayers — the so-called Unnamed Persons Requirement (UPR) under ITA section 231.2 — is also being streamlined. Bill C-31 reduces the procedural friction the CRA faces when going to court ex parte to authorize an UPR. For real estate developers, crypto exchanges, payment processors, and any business handling third-party transaction data, expect more UPR letters and tighter response windows starting in late 2026.

3. The Crypto-Asset Reporting Framework is in the same bill

Bill C-31 also implements Canada’s adoption of the OECD Crypto-Asset Reporting Framework (CARF). Due-diligence and data-collection obligations on Canadian crypto-asset service providers begin January 1, 2026, with the first annual XML submission to the CRA due in 2027 for the 2026 calendar year. Stablecoins, NFTs, and any blockchain-based instrument that can be used for payment or investment are in scope. If your corporate group holds digital assets on its balance sheet, the documentation trail you need to give the CRA on a NoNC is no longer just CSV exports from a wallet — it is jurisdictional source-of-funds, counterparty identification, and tax-residency confirmation for every counterparty.

4. Automatic tax filing for 5.5M low-income Canadians

Less relevant to owner-managers directly, but worth noting: Bill C-31 also rolls out automatic filing of T1 returns for up to 5.5 million low-income Canadians by the 2028 tax year, beginning with the 2026 tax year. If you run payroll for low-wage workers, expect questions from staff who suddenly find a T1 has been auto-filed on their behalf. The Global Minimum Tax Act amendments in the same bill close residual gaps in Canada’s adoption of OECD Pillar Two, primarily affecting groups with consolidated revenue above EUR 750 million — outside Insight’s typical client, but relevant if you have a foreign parent.

What we are telling Insight clients to do this week

For our mid-cap private corporation and NPO audit clients, the action list before Bill C-31 receives royal assent is short and concrete.

Tighten the document hygiene. Every intercompany loan, management fee, shareholder loan, and TOSI-relevant family payment should have contemporaneous written support — board minutes, intercompany agreements, transfer-pricing memos. The NoNC clock does not care that the documentation existed; it cares whether you can produce it within the response window.

Confirm your records-retention period. The CRA’s current six-year retention rule from the end of the last tax year remains, but with reassessment windows now extendable indefinitely during disputes, plan for ten years on anything touching valuation, surplus accounts (CDA, GRIP, LRIP), or LCGE-eligible Qualified Small Business Corporation (QSBC) share planning. The 2026 LCGE limit is $1,275,000, indexed from the prior $1,250,000 base — and any planning toward that exemption needs a clean paper trail from incorporation onward.

Triage your privilege boundary. If you have any active dispute or anticipated dispute, route sensitive analysis through legal counsel under instruction, not through your accountant directly. Insight files are powerful audit-defence tools, but they are not privileged.

Review the audit committee or governance file. For our NPO audit clients in particular — Ontario charities operating under the ONCA and federally incorporated entities under the CNCA — board minutes should now explicitly reference compliance review for ITA section 149.1 ongoing requirements and political-activity limits. CRA charity audits are a separate workflow but the NoNC mechanic applies.

Brief your CFO or controller on the new penalty math. The $50/day cap looks small until you realize it can run on multiple NoNCs simultaneously across multiple entities in a corporate group. A 12-entity holdco-opco structure can face $300,000+ in NoNC penalties before any actual tax is reassessed.

Where this lands in 2026

First reading on May 7 is the start, not the end. Expect second reading and committee study through June, with potential royal assent in the fall sitting. Once in force, the NoNC mechanic applies to information requests made after royal assent — but the daily penalties accrue from the date the request is unanswered, not from the date of the bill. The asymmetry favours preparation now over reaction later.

For deeper background, the authoritative sources are the Department of Finance Canada news release of May 7, 2026, the Parliament of Canada Bill C-31 (45-1) first reading text, and the CRA’s existing compliance and enforcement landing page which will be updated as the bill progresses.

This article is for general information only and is not professional advice. Tax law changes frequently. Before acting on anything here, contact Bader A. Chowdry, CPA, CA, LPA at Insight Accounting CPA Professional Corporation in Mississauga. Reach us at (905) 270-1873 or bader@insightscpa.ca.