Average years do not exist in construction
Tax planning built for a steady business fails a GC, because contract profit lands when jobs close, not in twelve even slices. The planning that works runs on the same schedule the business does: a look at the WIP each quarter, a projection of which jobs will reach completion before year-end, and decisions made while the year can still be shaped. By the time a T2 is being prepared, every lever except one or two has already expired.
This page is the shape of that work, the standing levers we pull for contractors through Tax Planning and Advisory: instalments, owner pay, equipment timing, and what to do with the profit the business keeps.
Instalments that track the year you are having
Once corporate tax passes $3,000, instalments start: monthly by default, quarterly for a small CCPC with a clean compliance record, the small business deduction claimed and taxable income inside the limit. What most contractors miss is that the base is a choice. Instalments can follow last year's tax or a current-year estimate, and in a lumpy trade the difference is real cash.
After a big close-out year, the prior-year base has you funding the CRA as if the spike were permanent, exactly when a slow spring is starving the account. We estimate from the live WIP instead, revisit quarterly, and accept the discipline that estimating demands: land too low and instalment interest accrues. Unincorporated GCs run the same logic personally, where instalments trigger once net tax owing passes $3,000 in the current year and either of the two before it.
Owner pay: set the mix before the year closes
Salary versus dividends is not a slogan war; it is arithmetic that changes with each year's profit, and it has to be set before the fiscal year ends to matter. The standing comparison:
| Question | Salary | Dividends |
|---|---|---|
| Corporate deduction | Yes, reduces profit taxed in the company | No, paid from after-tax profit |
| RRSP room and CPP | Builds both | Builds neither |
| Remittance mechanics | Payroll withholdings through the year | Declared when useful, taxed personally that year |
| Timing flexibility | Low | High, which is worth a lot between lumpy years |
Construction adds one lever most owners never use: the year-end bonus. A bonus accrued before the fiscal year ends is deductible that year but taxable to you only when paid, and the rules allow 180 days after year-end to pay it. Handled properly, a strong year funds the deduction now while the personal tax lands in the next calendar year.
Dividends to a spouse or family member who does not genuinely work in the business are usually caught by TOSI and taxed at top rates; roughly 20 hours a week of real involvement is the main way through. We test the mix against the actual year, every year.
Equipment: available for use beats invoiced
CCA follows possession and use, not the purchase order, so a machine that arrives in January belongs to next year no matter when it was ordered. The classes that matter to a GC: pickups and vans in Class 10 at 30%, excavators, skid steers and other power-operated movable equipment in Class 38 at 30%, small tools under $500 written off in full, most other equipment in Class 8 at 20%. The half-year rule stays suspended for eligible equipment available for use before 2028, which doubles the usual first-year claim, but the $1.5 million immediate-expensing window closed for property available for use after 2023.
The honest rule: buy because the schedule needs the machine, then time the purchase to the tax year. A December delivery of equipment you needed anyway is planning; buying to chase a deduction spends a dollar to save a fraction of one.
Profit the company keeps
Ontario's combined small-business rate of about 12.2% on the first $500,000 of active profit is the quiet engine of contractor wealth: profit left inside the corporation keeps roughly 40 more points working than profit paid out at top personal rates, and in this trade retained cash is never idle. It floats the holdbacks you are waiting on, buys iron, and builds the working capital a bond line is priced against.
Two flags on the retained pile. Cash invested inside the company can eventually grind the small-business limit once passive income passes $50,000 a year, so where the money sits belongs in the plan. And the holdback timing rules we apply with the corporate tax filing add a genuine deferral lever at year-end for jobs reaching substantial performance. Planning is deciding these things on purpose, before the year decides them for you.
