CRA Net Worth Assessment Calculator
The CRA has decided your assets grew by more than your reported income explains. Work out the imputed discrepancy, the tax, HST, penalty and interest built on it, and exactly how much every dollar you can document is worth.
total assessment
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How the CRA Builds the Number
| Step | Basis | Amount |
|---|
What Gets Assessed on It
| Assessment | Basis | Amount |
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What Every Documented Dollar Is Worth
| If You Substantiate | Discrepancy Falls To | Assessment Falls By |
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Where the Documents Usually Are
| Source | What Proves It |
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Points That Decide This
What to Do Next
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Disclaimer: Subsection 152(7) permits the Minister to assess in the manner considered appropriate where a return has not been filed or is unsatisfactory, and the net worth method is one such approach. An assessment is presumed valid and the onus sits with the taxpayer to displace the Minister’s assumptions. Corporate tax is calculated at the Ontario combined small business rate of 11.2%, reflecting Ontario’s reduction to 2.2% effective 1 July 2026, and 26.5% above the $500,000 limit. HST is treated as included in the unreported amount at 13/113. The gross negligence penalty under subsection 163(2) is 50% of the understated income tax, and under section 285 of the Excise Tax Act it is 25% of the HST, and both require the CRA to establish the necessary standard of conduct. Interest is estimated at 8% compounded over a midpoint of the exposure period and the actual figure depends on the prescribed rates and reassessment dates. Where the shareholder is assessed on the same funds the corporation is assessed on, the amount is taxed twice, which is the position the CRA commonly takes on an owner-managed file. This page is general information and not tax advice, and no calculator substitutes for representation on a live audit.
You Have to Disprove It, Not Them Prove It
This is the single most important thing to understand, and it surprises everyone. A net worth assessment is presumed valid. The CRA does not have to prove you earned the money. You have to displace the assumptions they made.
That reverses the instinct most people bring to it. Arguing that the method is crude, or that the CRA cannot possibly know what you earned, changes nothing. Producing a bank record showing where $80,000 came from changes everything.
Every dollar you document comes straight off the top. On a typical owner-managed file the assessment runs to roughly $1.05 for every $1 of unexplained discrepancy, so substantiating $200,000 of a gift or loan removes about $233,000 of assessment. Nothing else you do on the file has that leverage.
How the Number Is Built
| Step | Effect |
|---|---|
| Closing net worth less opening net worth | The increase in your wealth |
| Plus personal and family living expenses | Money you must have earned to spend |
| Less non-taxable receipts | The only line that works in your favour |
| Equals income for the period | What the CRA says you must have made |
| Less income reported | What you actually declared |
| Equals the discrepancy | Assessed as unreported income |
It Gets Taxed Twice on an Owner-Managed File
Where the CRA concludes that unreported corporate sales were taken personally, it typically assesses the corporation on the revenue and the shareholder on the appropriation. The same money, taxed on both sides.
| On a $730,000 Discrepancy | Amount |
|---|---|
| HST at 13/113 of the amount | $83,982 |
| Corporate tax on the revenue | $72,354 |
| Personal tax on the shareholder benefit | $261,761 |
| Gross negligence penalties | $188,053 |
| Interest | $157,424 |
| Total | $763,574 |
That is more than the discrepancy itself. A dollar the CRA says you did not report costs about $1.05 once both sides, both penalties and the interest are added. It is one of the few assessments in the system that can exceed the amount in dispute.
The Four Places the Number Is Usually Wrong
- Opening net worth understated. If you already held cash, investments or property at the start and the CRA did not count it, the growth is overstated by exactly that amount. This is the most productive line of attack and the most commonly overlooked.
- Living expenses overstated. The CRA frequently applies statistical averages rather than what your household actually spent. If you live modestly, prove it with the bank records rather than accepting the estimate.
- Non-taxable receipts ignored. Gifts, inheritances, loans from family, insurance proceeds, sale of personal property, lottery winnings, contributions from a spouse or a cohabitant. Each is a dollar-for-dollar reduction.
- Double counting. An asset counted at closing that was also treated as an expenditure, or a loan counted as an asset without the matching liability.
The Documents That Actually Work
| Source of Funds | What Proves It |
|---|---|
| A gift from family | The transfer record and a statement from the giver, ideally with their own bank record showing the outflow |
| An inheritance | The will, the estate accounts and the distribution record |
| A loan | The agreement, the advance, and evidence of repayments |
| Sale of personal property | The bill of sale and the deposit matching it |
| Funds brought from abroad | Wire records and the foreign source account |
| A spouse’s contribution | Their own income records and the transfers |
A statement without a bank trail is weak. A bank trail without an explanation is weak. The two together are what moves an auditor.
The Gross Negligence Penalty Is Fightable
The penalty is 50% of the understated income tax and 25% of the HST, and the burden of proving it sits with the CRA rather than with you. That is the one part of the file where the onus is reversed in your favour.
Establishing that the underreporting arose from poor records, bad advice or genuine confusion rather than knowing conduct or indifference frequently removes the penalty even where the underlying assessment largely stands. On the figures above that alone is $188,000.
The Years Do Not Close
The normal three-year reassessment period does not apply where there has been a misrepresentation attributable to neglect, carelessness or wilful default, which is precisely what a net worth assessment alleges. Older years stay open.
What to Do When the Letter Arrives
- Do not answer questions from memory. Early informal explanations that later turn out to be wrong are used against you for the rest of the file.
- Get representation before the proposal letter becomes an assessment. Fixing it at audit is far cheaper than at objection, and far cheaper again than at the Tax Court.
- Rebuild the opening net worth first, because it is the highest-value correction available.
- Gather the third-party records, meaning bank statements, the giver’s records, estate documents and loan agreements.
- Address the penalty separately from the quantum, because it turns on conduct rather than arithmetic.
- Watch the objection deadline, which is ninety days from the notice of assessment and is not forgiving.
Do not ignore the assessment because the number looks impossible. Collection proceeds on the assessed amount whether or not it is right, and a net worth assessment that goes unchallenged past the objection deadline becomes final regardless of how wrong it was.
What This Calculator Does Not Cover
- The specific assumptions in your proposal letter, which is what representation actually addresses
- Provincial variation outside Ontario
- Criminal investigation, which is a different process with different rights
- Director liability for the HST portion
- Payment arrangements and collections holds during an objection
- Taxpayer relief on the interest, which is a separate application
Every hour spent finding a document is worth more than an hour spent arguing about method. Our net worth assessment service covers the rebuild, the submissions and the objection.
Frequently Asked Questions
Common questions from businesses under a net worth audit.
Related Calculators and Guides
More tools for CRA disputes and cleanup.
An Hour Finding a Document Beats an Hour Arguing About Method
Send us the proposal letter and whatever records exist. We rebuild the opening net worth, document the non-taxable receipts, challenge the living expense estimate and address the penalty separately from the quantum.