The Canada Revenue Agency confirmed this month that the prescribed rate on loans between family members holds at 3 percent for the third quarter of 2026, covering July 1 through September 30. It is the fifth consecutive quarter at that level, and it means the window to lock in a 3 percent prescribed-rate loan remains open for another seven weeks.
The mechanics matter more than the headline number. A loan documented and funded at the prescribed rate in effect when the loan is made keeps that rate for the life of the loan, even if the CRA raises the prescribed rate in a later quarter. A family that sets up the structure in August 2026 is locking in 3 percent permanently, not just for this quarter.
How the Strategy Actually Works
A higher-income spouse, or a family trust funded by a higher-income parent, lends money to a lower-income spouse, common-law partner, or adult or minor child at the prescribed rate. The borrower invests the funds in a non-registered account and earns whatever return the investment produces. The borrower pays the lender 3 percent annual interest, due within 30 days of year-end, and reports investment income in their own tax bracket.
The lender reports the 3 percent interest received as income. The borrower, taxed at a lower marginal rate, keeps everything the investment earns above that 3 percent cost of capital. Miss the 30-day interest payment deadline in any year and the strategy unwinds for that year and every year after: investment income reverts to being attributed back to the lender at the lender's higher rate.
The step chart traces the CRA prescribed rate back to the start of 2022, and the flat line since the third quarter of 2025 is the specific window this strategy is built around.
The rate is set quarterly from the average yield on three-month Government of Canada Treasury bills auctioned in the first month of the preceding quarter, rounded up to the next whole percentage point.
Why the Rate Environment Extends the Window
The prescribed rate is not set by policy discretion. Regulation 4301 pins it to the average yield on three-month Government of Canada Treasury bills auctioned in the first month of the preceding quarter, rounded up to the next whole percentage point. The auction yields that will determine the October 1 rate were set in July, and they sat close to 2.25 percent, well under the 3 percent threshold.
Barring a sharp move in short-term yields between now and the CRA's announcement, the arithmetic points to a sixth consecutive quarter at 3 percent starting October 1. That does not eliminate the case for acting inside the current quarter. A family that wants certainty, rather than a rate that depends on a September Treasury bill auction, can lock in the known 3 percent figure today rather than wait on a number that has not yet been calculated.
Where This Fits Against Registered Accounts
The prescribed-rate loan strategy operates entirely outside RRSP, TFSA and FHSA contribution room. It does not compete with those accounts, and it does not require unused contribution space to implement. This matters most for a couple who have already maximized their RRSP and TFSA contributions and are directing further savings into a non-registered account in a single higher-earning spouse's name, where investment income compounds at that spouse's full marginal rate every year.
A family trust structure extends the same mechanism to adult or minor children, with the trust receiving the loan and making annual distributions to beneficiaries in lower tax brackets. The trust route adds documentation and administrative cost that a direct spousal loan does not, and is generally reserved for families with multiple children or larger sums where the tax savings justify the added structure.