The Canada Revenue Agency confirmed Tuesday that the prescribed rate on loans between family members will stay at 3 percent for the third quarter of 2026, covering July 1 through September 30. It is the fifth consecutive quarter at that level, the longest stretch the rate has held this low since it first touched 3 percent in the final quarter of 2022. The rate Canadians pay on overdue tax, CPP contributions and EI premiums, which is always four points above the prescribed rate, stays at 7 percent.
One number in the same release did move. The rate used for corporate pertinent loans and shareholder indebtedness rose to 6.3 percent for Q3, up from 6.2 percent in Q2. It is a small change, but it is the first increase in any CRA administered rate since the broader cycle began easing in the second half of 2024. After two years of rates moving in one direction only, that makes it worth tracing exactly how the calculation works.
How the Number Gets Set
The prescribed rate is calculated from the simple average of three month Government of Canada Treasury bill yields during the first month of the preceding quarter, then rounded up to the next whole percentage point if it is not already a whole number. The rate for July through September was set from April's average T-bill yield. The rate for October through December will be set from July's average, and July is the first full month markets have to digest the Federal Reserve's June 17 decision to hold rates while signalling a median policy rate of 3.8 percent by year end, up from 3.4 percent in March.
Canadian short term yields do not move in lockstep with the Federal Reserve, and the Bank of Canada has held its own policy rate at 2.25 percent through five consecutive decisions including its most recent one on June 10. But Government of Canada T-bill yields are not set in isolation from global rate expectations, and the corporate pertinent loan rate's move from 6.2 to 6.3 percent is the first concrete sign that the input feeding the Q4 prescribed rate calculation has started to shift.
The Loan Locks In, the Quarter Does Not
This is where the planning conversation lives. A prescribed rate loan, whether made directly to a spouse or common law partner or routed through a family trust, locks in whatever rate is in effect on the day the loan documentation is completed and the funds transfer. That rate then applies for the full life of the loan. A family that sets up a loan this quarter locks in 3 percent indefinitely. A family that waits until October, if the Q4 rate has moved to 4 percent on the strength of higher T-bill yields, locks in 4 percent indefinitely instead.
The mechanics that make the strategy work have not changed. The higher earning family member lends investable capital to a lower income spouse, adult child or family trust at the prescribed rate. The borrower invests the funds and reports the resulting income or capital gains in their own, lower bracket. Interest at the prescribed rate must actually be paid, and paid by January 30 of the following year, or the attribution rules pull the income back to the lender's higher bracket retroactively. The lender reports the interest received as income and the borrower deducts the interest paid against their investment income.
Where This Shows Up by Account Type
Direct spousal loans are the simplest version and the one most often missed for clients with a non-working or lower income spouse and a non-registered investment account sitting in the higher earner's name. Family trusts extend the same mechanic across multiple beneficiaries, typically adult children, and are worth a fresh look for clients who set one up when the rate was 1 percent and have since let the structure sit idle. For business owner clients with a Canadian controlled private corporation, the relevant figure is the pertinent loan or indebtedness rate, now 6.3 percent, which governs shareholder loans from a corporation to a connected non-resident or in certain cross-border structures and is the one rate in this release that already moved.
The prescribed rate's path since the end of 2022 shows two years of steady increases followed by two years of steady declines, and the current five quarter plateau at 3 percent is the longest flat stretch in that entire run.
Each step reflects a CRA quarterly announcement; the rate is derived from average three month Government of Canada Treasury bill yields in the first month of the prior quarter. Source: Canada Revenue Agency prescribed interest rate notices, 2022 to 2026.
What to Watch Before October
None of this means the rate will rise in the fourth quarter. T-bill yields could hold steady or fall through July regardless of what the Fed signalled in June, and the Bank of Canada's own posture remains far more cautious than its American counterpart's. But the planning bridge does not require certainty about Q4 to be useful now. A client who has been meaning to set up a prescribed rate loan, or who has additional investable capital that could go through an existing family trust, has a known, locked in rate available today and an unresolved input pointing toward the possibility that today's rate is the better one to lock in.