Paying Subcontractors in Construction? You Probably Need to File a T5018

There is a CRA filing here that a lot of contractors have never heard of. In my experience the ones who find out late tend to find out the same way, which is a letter from CRA asking about periods they never filed.

The T5018, Statement of Contract Payments, reports what you paid subcontractors for construction services. CRA introduced it to reduce the underground economy in construction, which means the whole point is data matching. What you say you paid gets compared against what your subcontractors say they earned.

It is not part of your corporate return. It is a separate information return, with its own deadline and its own program account, and it is easy to go years without realizing it applies to you.

Who has to file one

You have to file if more than 50% of your business income comes from construction activities and you paid a subcontractor for construction services.

That percentage is the part people get wrong. It is not "am I a construction company", it is a test on where your income comes from. A business that does a mix of work can cross the line without anyone noticing.

What counts, and what does not

• Goods only: not reportable. If all you bought from them was materials, no slip is needed.
• Services, or a job that bundles labour and materials: reportable once the service portion of what you paid them is more than $500 for the period.
• The $500 is a running total per subcontractor across your whole reporting period, not per invoice. Four $200 cheques to the same sub is $800, and that is a slip.

The GST/HST rule that trips everyone

There are two different tax rules here, and mixing them up is the most common T5018 error I see.

• The $500 threshold is tested before GST/HST.
• The amount you actually report on the slip includes GST/HST and PST.

So a $600 subcontractor invoice plus 13% HST in Ontario means you paid $678. The threshold test uses $600. The slip says $678.

This is also why a subcontractor occasionally looks at a T5018 and says the number is too high. It is higher than their revenue, because it includes the HST they charged you and remitted. That is correct.

This is a paid-or-credited return, and that is why holdback matters

You report what you actually paid or credited during the period, not what you were billed. An invoice still sitting in payables at year end is not on this year's slip.

That means holdback lands on the slip in the year you release it, not the year you accrued it. So your profit and loss statement and your T5018 will not agree, and that is correct rather than a mistake.

Holdback also has its own GST/HST timing rules, which are a separate matter from the reporting rule above. If you are holding back, or being held back on, that is worth getting right in the books before it becomes a year-end problem.

The deadline nobody expects

Your reporting period can be your calendar year or your fiscal year, your choice. Once you pick one you have to stay consistent, and changing it later needs written authorization from CRA.

The return is due six months after your reporting period ends. A December 31 year end means June 30. If that date lands on a weekend or public holiday, the next business day is on time.

Six months sounds generous, which is exactly why it gets missed. It does not line up with anything else in your year. It is not T4 season and it is not your corporate filing date, so nothing prompts you.

What it costs to get wrong

Filing late carries a penalty, starting at $100. The exact amount depends on how many slips are late and how long they are late for.

One thing worth knowing, because plenty of writing online gets it wrong: the penalty is not multiplied by the number of slips. CRA uses the number of late slips to work out which penalty bracket applies, so twelve late slips does not mean twelve separate penalties.

The avoidable one is paper. Since the start of 2024, if you file more than five slips you must file electronically, and mailing paper instead is a flat $125 for a return of 6 to 50 slips. Eight subs and an envelope costs $125 for nothing.

What if you should have been filing and never have?

You are not the first, and quietly starting this year while hoping the earlier ones are forgotten is the worst option available. Data matching is the whole purpose of this return, so prior years do not fade away.

Talk to your accountant before you file anything. There are ways to deal with prior years, and the order you do things in genuinely matters, which is why it is a conversation to have first rather than after you have already filed.

How to make this a non-event

• Register for an RZ program account before you need it. T5018 files under an RZ information return account, which is separate from your RP payroll account and your RT GST/HST account. You may already have an RZ account for other slips, but CRA distinguishes between types, so check you have the right one well before the deadline rather than on June 20.
• Get every subcontractor's legal name and business number when you hire them, not when you are filing. Chasing this after the fact is the single biggest time sink in the whole job.
• Code labour separately from materials as the bills come in, so you can tell a goods-only supplier from a subcontractor at all.
• Put the deadline in your calendar with the reporting period you actually chose.

One thing you do not have to do: unlike a T4, you are not required to give the subcontractor a copy. You can as a courtesy, and if you do, leave your account number off their copy.

Where the edges are

• If construction is not your primary income, you are out of T5018, but you may have a different reporting obligation instead. Worth checking rather than assuming.
• If a subcontractor is not resident in Canada, you are in a different regime entirely, with its own form and its own withholding requirements. Do not guess at that one. It is a question to ask before you pay the invoice, not after.
• If any of those subs are really employees, this return is effectively a map of everyone you paid for labour. Worker classification is a question for a CRA ruling, not an opinion.

I am a bookkeeper, not a CPA. This is general information, not tax advice, and CRA rules and penalty amounts change. I prepare and file T5018 returns for construction clients. What I do not do is rule on whether a worker is a subcontractor or an employee, or advise on years you should have filed and did not. Those go to your accountant, and I will tell you when we are at that line.