The T5018 survival guide: who needs it, when it's due, and how to avoid penalties.
A short guide to the T5018 form for trade business owners, covering who needs to file and how to avoid costly CRA penalties.
If you run a business in the trades, whether you are in HVAC, plumbing, roofing, or general contracting, there is a specific tax form that causes more confusion than any other. It isn't your corporate T2, and it isn't your GST return. It is the T5018, the Statement of Contract Payments.
The CRA uses the T5018 to track the underground economy. If you hire other businesses or individuals to help you complete a project, the CRA wants to know exactly who you paid and how much.
If you are staring at a stack of invoices from the past year and wondering if you need to file, this guide is for you.
Does this apply to my business?
Many owners assume that construction means new skyscrapers or housing developments. The CRA's definition is broader.
For tax purposes, construction activities include:
- Installation, like putting in a new furnace or AC unit.
- Repair and maintenance, like fixing a burst pipe or patching a roof.
- Excavation and demolition.
- Renovation, like remodeling a bathroom.
If your business earns revenue from any of the above, you likely fall under the reporting requirements.
The 50 percent income rule
Owning a hammer does not put you on the hook. The CRA applies a simple test: do construction activities make up more than half your business income?
You run a hardware store that occasionally installs a door for a customer. Ninety percent of your income comes from retail sales and ten percent from installation. You likely do not need to file.
You run a plumbing company. You sell toilets and sinks, and you also install them. Even if you make a profit on the parts, the CRA usually views the entire job as a construction activity. If the bulk of your revenue is tied to site work, you need to file.
Who counts as a subcontractor?
A subcontractor is any individual, partnership, or corporation you hire to perform construction services for your business.
- You are a general contractor renovating a basement. You hire an electrician to wire the room and a drywaller to put up the walls. Both are subcontractors.
- You are an HVAC technician with too many service calls. You pay a friend with their own truck to handle three calls for you. That friend is a subcontractor.
You do not need to file a T5018 for suppliers who only sold you materials, like lumber or piping. You file for those who provided services (labor) or a mix of labor and materials.
What information to collect
To fill out a T5018 slip, you need three pieces of information for every subcontractor you paid CAD 500 or more (including GST/HST) during the reporting period:
- Their name, or business name.
- Their address.
- Their identifier, a Social Insurance Number or Business Number.
If you hired a helper for a few weeks in July, paid them by cheque, and never spoke to them again, tracking down their SIN in February is awkward and slow.
Make it a policy to collect this information before you pay the first invoice. Have every new subcontractor fill out a simple onboarding form. If they refuse to provide a BN or SIN, you are the one taking on the penalty risk.
When the T5018 is due
Unlike your personal taxes, which always run January to December, the T5018 offers flexibility. You can choose to report payments based on:
- The calendar year, January 1 to December 31.
- Your fiscal year, the same year-end as your corporation.
The deadline: file the T5018 information return within six months after the end of your chosen reporting period.
Most trade businesses pick the calendar year, since it aligns with T4s for employees. If you choose the calendar year, the deadline is June 30.
When is the T5018 due in Canada?
The T5018 information return is due within six months after the end of your reporting period. Most trade businesses report on the calendar year, which makes the annual deadline June 30.
- Reporting period
- Calendar year or your fiscal year (your choice, but stick with it)
- Calendar-year deadline
- June 30 of the following year
- Fiscal-year deadline
- Six months after your fiscal year-end
- Threshold
- CAD 500 or more paid to a subcontractor (including GST/HST)
The penalty for ignoring it
The CRA takes the T5018 seriously. If you file late, or not at all, penalties scale with the number of slips you should have filed.
Beyond the late fees, failing to file is a red flag that often triggers a deeper audit. If the CRA sees you aren't tracking subcontractors, they start wondering what else is missing from your books.
How to make this easier next year
The days of tracking subcontractors in a spiral notebook are over. The cleanest way to handle T5018s is cloud accounting software (like Xero or QuickBooks Online) that lets you tag vendors as T5018 eligible.
When you tag a vendor, the software tracks every payment to them throughout the year. At tax time you generate a report with one click that lists every sub, their total payments, and their details.
You probably already know, but the cost of a missed T5018 is rarely the late fee. It is the audit that follows.
- Canada Revenue Agency. RC4445 — T5018 Statement of Contract Payments. The CRA's official T5018 guide.
- Canada Revenue Agency. T5018 information return. Who must file, when, and how to submit electronically.
- Canada Revenue Agency. Penalties for failing to file information returns. The current penalty schedule.
Get a free review of your books. We'll flag your T5018 exposure for free.
At Numinor, we work with trade businesses on flat plans: CAD 299 a month for Starter, CAD 499 a month for Growth. Bookkeeping, sales tax, and year-end, scoped on the discovery call. No hourly billing, no surprise invoices in March.
Book a 30-minute discovery call and we'll review last year's books at no cost. You'll walk out with a written read on your subcontractor exposure, whether you sign on or not.