CRA new audit powers: oral answers are law, the $25,000 penalty is not

Which audit powers are law today, and which are still proposals?

Only the first five rows below are in the Income Tax Act. The consolidation on the Justice Laws site is current to September 21, 2026, last amended June 18, 2026, and it has no section 231.9 and no penalty in 231.7 laws-lois.justice.gc.ca. Everything else in the table comes from Bill C-31.

Bill C-31 is the Budget 2025 Implementation Act, No. 2. It had first reading on May 6, 2026, and as of October 2026 it sits at committee in the House of Commons, with the Senate studying it in advance, and no royal assent parl.ca. Finance's explanatory notes say the audit measures take effect on royal assent, so none of them applies to your client yet fin.canada.ca.

What the 2022 change to 231.1(1)(d) lets an auditor demand

The version of 231.1(1)(d) in force until December 14, 2022 reached the owner or manager and anyone else on the premises, who could be required to attend at the site with the auditor laws-lois.justice.gc.ca. The current text reaches "a taxpayer or any other person". It can require that person to attend at a place the auditor designates, or by video conference or another electronic link, and answer orally, or to answer in writing in a form the auditor specifies laws-lois.justice.gc.ca.

That matters because a refusal already has teeth. A judge can order your client to provide the access, assistance, information or documents sought under 231.1 or 231.2, on five clear days' notice of the application, and ignoring the order is contempt of court laws-lois.justice.gc.ca. Failing to comply with sections 230 to 232 is also an offence: a fine of $1,000 to $25,000, or the fine plus up to 12 months in prison laws-lois.justice.gc.ca.

Two limits hold today. Documents protected by solicitor client privilege can't be compelled under a compliance order laws-lois.justice.gc.ca. And the CRA can't require a third party to produce information about unnamed persons without first getting a Federal Court judge's authorization laws-lois.justice.gc.ca.

How the proposed notice of noncompliance would work

Under proposed 231.9, the Minister could serve the notice whenever it determines your client hasn't complied in full or in part with a 231.1(1)(d), (e) or (f) requirement, or a 231.2(1) or 231.6(2) notice. The notice must say, year by year, how your client failed to comply parl.ca.

The notice stays outstanding until the Minister is satisfied your client has complied, or has done everything reasonably necessary to comply. No penalty applies if your client reasonably believed the material was protected by solicitor client privilege parl.ca. The CRA's T2 page describes the same proposal, effective on royal assent, including a stop on the reassessment clock for as long as the notice is outstanding canada.ca.

What would the proposed penalties cost? A worked example

Proposed 231.7(6) adds a penalty of 10% of the aggregate tax payable for every year a compliance order covers. It doesn't apply if the tax payable for each of those years is under $50,000, and the Minister must waive or cancel all or part of it if the Minister determines it is disproportionate or unfair parl.ca. Finance's notes say it targets the taxpayer's own noncompliance, not third party requests fin.canada.ca.

Say a judge orders a corporation to produce records for three years. One year is at $50,000 or more, so the proposed 10% would run on all three years combined:

If 2022 had come in at $49,000 instead, every year would be under $50,000 and the penalty would be nil. The notice of noncompliance is simpler: a notice outstanding for 120 days would cost 120 × $50 = $6,000, and the $25,000 cap would be reached on day 500.

One more trap in the bill: proposed 220(3.1) carves 231.7 penalties and their interest out of the general ten year relief power, so the 231.7 waiver is the only route to relief parl.ca.

How you should handle an information request now

Treat a 231.1 request for answers as binding today. The written or oral answer obligation is already law, and a refusal can end in a compliance order and contempt laws-lois.justice.gc.ca. The CRA audit process page covers the response timelines at each step.

Contesting a request doesn't run down the clock. Under 231.8, the time from a judicial review of a 231.2 requirement, or from opposing a 231.7 application, until it's finally disposed of isn't counted in the reassessment period laws-lois.justice.gc.ca. A T2029 waiver is the other way the period gets extended, and it's your client's choice to sign.

Watch Bill C-31 on LEGISinfo. The day it receives royal assent, the $50 a day notice, the 10% penalty and the wider stop the clock rules become available to the CRA parl.ca.