T5018: the return the CRA reads beside yours
If more than half of your business income comes from construction, you must file a T5018 information return reporting what you paid each subcontractor for construction services: every sub paid $500 or more in the period, with the reported amount including the HST you paid them. You choose a calendar-year or fiscal-year reporting period, and the slips are due within six months of its end. We build the slips straight from the payables ledger, so nothing is missed and nothing is guessed.
The CRA runs a matching program on those slips: what you report gets compared against what your subs declared. That cuts both ways. Slips you receive as a sub on larger jobs should reconcile to your own revenue, and slips you issue should be complete, because a missing or late return draws penalties and attention. Payments purely for goods are not reportable; mixed invoices for goods and services are reported in full. And a T5018 is for genuine subcontractors: a crew member who is a sub on paper but an employee in fact is a payroll problem no slip fixes.
Holdbacks: earned is not receivable
Ontario's Construction Act requires 10% of each payment to be held back until substantial performance is certified and the lien period expires. For income tax, the courts and long-standing CRA practice treat that money as not receivable until certification, which means holdbacks can stay out of taxable income until the year they become legally due, even though the work is done and billed. On a contractor's volume that deferral is real money: on a $2,000,000 contract the holdbacks are $200,000, and postponing tax on them until the lien period clears is not a rounding error.
The logic runs both ways. Holdbacks you retain from your subcontractors are not deductible until they become payable, so books that carry holdback receivable and holdback payable as their own accounts let the T2 take the position cleanly and apply it consistently, year after year.
HST that waits for the release
The Excise Tax Act has a matching rule for the 13%: HST on a held-back amount is not collectible until the earlier of the day the holdback is paid and the day the holdback period expires. A properly built HST return therefore does not remit tax on the 10% the owner is still holding, and the same timing governs when the payer of a holdback can claim the input tax credit. Getting this wrong in the safe direction, remitting before you must, quietly lends the CRA your working capital; wrong in the other direction, it accrues interest. The whole timeline in one place:
| Event on the job | Income tax | HST |
|---|---|---|
| Progress draw certified and billed, 90% paid | The 90% is income, subject to your contract method | Collectible on the 90% |
| 10% held back under the Construction Act | Not receivable yet; can stay out of income | Not collectible yet |
| Certificate published, lien period expires, holdback released | Income now | Collectible on release or expiry, whichever comes first |
The contract-method question at year-end
Contracts that straddle year-end force a method decision. Long-standing CRA administrative practice lets a contract expected to run no more than two years be reported on completion, with profit landing in the year the job finishes; anything longer needs progressive recognition, in practice a percentage-of-completion calculation supported by a credible WIP schedule. The method is not a dial to turn annually: chosen sensibly and applied consistently it smooths the file, changed casually it invites review. We settle it once, paper the reasoning, and build the year-end from the same WIP schedule your bank and bond line already see, so the tax file and the financial statements tell one story.
The calendar, and the letters that follow it
The corporate tax filing for a CCPC contractor is due six months after year-end with the balance owing three months after; T5018s are due six months after the period you chose; HST runs on its own cycle; T4s land at the end of February. We run the calendar so none of it collides with your build season.
When the CRA writes, and in construction it writes often, T5018 mismatch letters, HST reviews, sub-classification questionnaires, the response matters more than the panic, and CRA Audit and Review Support exists for exactly that. Smaller GCs who mostly need a professional in their corner month to month use CPA Quick Support at $99/month, which includes CRA letter review, and a sole proprietor not yet incorporated gets the same treatment on the T2125 through personal tax filing.
Source: CRA — GST/HST for businesses.
