A net worth assessment is a technique the Canada Revenue Agency uses to reconstruct a taxpayer's income indirectly. Rather than auditing reported income line by line, the CRA estimates the taxpayer's net worth at the start and end of a period, adjusts for non-taxable receipts and personal spending, and treats any unexplained increase in net worth as unreported income.
These assessments are presumed correct unless the taxpayer rebuts the specific factual assumptions the CRA relied on. They frequently reach back beyond the normal reassessment period under the misrepresentation rule and are often accompanied by gross-negligence penalties. Defending a net worth assessment generally requires detailed documentation of the source and timing of funds, opening balances, and personal expenditures.