Accountant for Contractors in Ontario: Construction & Skilled Trades Accounting
An accountant for contractors is a financial professional who provides job costing, tax compliance, HST filing, payroll management, subcontractor reporting, and strategic advisory services tailored to construction businesses and independent trades operating in Ontario.
Contractor accounting differs from standard small business bookkeeping because construction finances involve project-based revenue recognition, progress billing cycles, work-in-progress tracking, 10% statutory holdbacks under the Ontario Construction Act, WSIB coverage obligations, and T5018 subcontractor payment reporting to the Canada Revenue Agency.
Acctax delivers construction accounting services in Ontario built around these realities. Every engagement covers the 7 compliance areas that define contractor financial management:
- Job costing and profitability by project
- WIP and progress billing support
- HST filing at Ontario’s 13% rate
- Payroll setup and remittance scheduling
- T5018 subcontractor reporting
- WSIB compliance readiness and clearance awareness
- Corporate (T2) or sole proprietor (T2125) tax alignment
The result is a financial system that tracks profit at the project level, keeps CRA filings current, and protects the contractor’s ability to bid and work on Ontario job sites.
Talk to a Construction Accountant in Ontario
Get your job costing, compliance, and tax filings handled by a team that understands contractor finances.
An accountant for contractors manages the financial recording, tax compliance, and advisory functions specific to construction businesses and skilled trades operations. This includes interpreting project-level profitability, ensuring regulatory filings meet CRA and provincial deadlines, and evaluating tax positions to minimize liability while maintaining full compliance.
Contractor accounting covers 8 core service functions:
- Tracking revenue and costs by individual job or project
- Managing work-in-progress (WIP) schedules for accurate billing
- Filing HST returns and optimizing ITC recovery on tools and fuel
- Processing payroll source deductions (CPP, EI, and Income Tax)
- Preparing and filing T5018 Statements for subcontractors
- Maintaining WSIB registration and Ontario site clearance readiness
- Preparing T2 corporate returns or T2125 sole proprietor statements
- Advising on vehicle expenses and capital cost allowance (CCA)
Independent Contractors & Sole Proprietors
Self-employed trades professionals — including electricians, plumbers, carpenters, drywallers, painters, and HVAC technicians — report all business income and expenses on Form T2125 (Statement of Business or Professional Activities) attached to their T1 personal tax return. Sole proprietors face unique challenges: no tax is withheld at source on payments received, GST/HST registration becomes mandatory once revenue exceeds $30,000, and all vehicle, tool, and material expenses must be tracked with CRA-compliant documentation to support deductions.
Incorporated Trades & Construction Companies
Incorporated contractors file a T2 Corporation Income Tax Return annually — even in years with no income. The CRA requires mandatory e-filing for tax years beginning after 2023, with a $1,000 penalty for non-compliance. The T2 must be filed within 6 months of the corporation’s fiscal year-end. Incorporated contractors also manage CRA program accounts for GST/HST, payroll deductions, and corporate income tax, each with distinct filing schedules and remittance deadlines.
General Contractors Managing Subcontractors
General contractors who pay subcontractors for construction services carry T5018 reporting obligations and Construction Act holdback requirements in addition to their own tax filings. Managing the flow of progress draws, retainage, subcontractor payments, and information returns requires a bookkeeping system that tracks these transactions at the project level while maintaining compliance across every reporting period.
Standard bookkeeping records income when invoiced and expenses when paid. Construction accounting requires a fundamentally different approach because revenue is earned over the life of a project, costs accumulate across multiple phases, and statutory holdbacks delay final payment well beyond the completion of work.
Job Costing & Margin Leakage
Job costing assigns every dollar of labor, material, subcontractor payment, equipment cost, and overhead to a specific project. Without job-level cost tracking, a contractor can appear profitable in aggregate while individual projects erode margins through scope creep, underestimated material costs, or untracked change orders. Acctax configures every contractor’s chart of accounts to capture costs by job ID, enabling real-time visibility into which projects generate profit and which consume it.
WIP, Progress Draws, and Retainage/Holdbacks
Work-in-progress (WIP) reporting reconciles the value of work completed against the amount billed to date. A contractor who has completed 70% of a project but billed only 50% has underbilled — carrying real costs without corresponding revenue. The reverse creates overbilling, which inflates apparent cash flow while understating future obligations. WIP schedules prevent both distortions by providing an accurate snapshot of earned revenue versus recognized revenue at any point during a project.
Seasonal Cash Flow & Equipment Purchases (CCA)
Construction activity in Ontario follows seasonal patterns that create significant cash flow variability. Equipment purchases, fleet maintenance, and tool replacement represent capital expenditures that are depreciated through Capital Cost Allowance (CCA) rather than expensed in full. Proper CCA classification directly impacts the contractor’s taxable income.
| Dimension | Standard Bookkeeping | Contractor Accounting |
|---|---|---|
| Revenue Recognition | Invoiced/Received | % of Completion / Milestones |
| Accounts Receivable | Single Invoices | Progress Draws & Holdbacks |
| Holdback Handling | Not Applicable | 10% Statutory Holdback per Project |
| Work-in-Progress | Not Tracked | WIP Schedule (Costs vs. Billed) |
WSIB Coverage in Construction (Expanded Compulsory Coverage)
Ontario’s expanded compulsory coverage requires that all individuals who own or operate a construction business — with or without employees — must register with the WSIB and maintain active coverage.
This mandate applies to independent operators, sole proprietors, partners in a partnership, and executive officers of corporations engaged in construction activities classified under Class G of Schedule 1 (O. Reg. 175/98). Businesses must register within 10 calendar days of hiring their first employee. The limited exemption for home renovation work applies only when the contractor is directly retained by the homeowner or a family member for work on an existing private residence. Subcontractors retained by another contractor for the same project are not exempt.
The 2025 average WSIB premium rate for Ontario businesses is $1.25 per $100 of insurable payroll, with the maximum insurable earnings ceiling set at $117,000. Non-exempt partners and executive officers in construction receive a separate premium rate of $0.17 per $100.
WSIB Clearances: What They Prove and Why GCs Require Them
A WSIB clearance confirms that a construction business is registered with the WSIB and has an account in good standing — meaning all premiums are reported and paid.
Principals (general contractors and property owners) are legally required to obtain or require clearances from contractors before any construction work begins. A contractor without a valid clearance can be refused entry to a job site and lose the contract. Clearances are valid for up to 90 days from the date of issue.
T5018 Subcontractor Payment Reporting (Statement of Contract Payments)
The T5018 slip is a CRA information return that reports all payments made to subcontractors for construction services when construction activities account for more than 50% of the payer’s business income.
A T5018 must be issued for every Canadian-resident subcontractor who received total payments exceeding $500 (excluding GST/HST) during the reporting period. The reported amount includes GST/HST and PST where applicable. Payments made by cash, cheque, barter, or offset against amounts owing are all reportable. The T5018 filing deadline is 6 months after the end of the contractor’s chosen reporting period (calendar year or fiscal period). Non-compliance penalties are $25 per day, up to a maximum of $2,500 per filing.
The CRA uses T5018 data to cross-reference subcontractor income reporting and verify GST/HST registration compliance — identifying subcontractors who exceed the $30,000 small supplier threshold without registering.
Construction Act Holdback Basics (10% Holdback Rule)
Ontario’s Construction Act requires every payer on a construction contract to retain a holdback equal to 10% of the value of work done and materials furnished until the holdback release conditions are met.
This statutory holdback protects subcontractors’ and suppliers’ lien rights. The holdback applies to every tier of the contracting chain — from the property owner to the general contractor to each subcontractor. The accounting system must track holdback receivable (amounts owed to you, held by the payer) and holdback payable (amounts you retain from your subcontractors) as separate line items per project. Improper holdback tracking distorts cash flow reporting and creates discrepancies in accounts receivable and payable.
HST in Ontario (13%) + Small Supplier Threshold Decision Point
Ontario’s Harmonized Sales Tax applies at 13% on all taxable construction services and materials. Mandatory GST/HST registration is triggered when total taxable revenues exceed $30,000 over four consecutive calendar quarters.
Most active Ontario contractors exceed this threshold early in their first year. Once registered, the contractor charges 13% HST on all invoices, collects the tax from clients, files regular HST returns, and remits the net amount (HST collected minus Input Tax Credits) to the CRA. ITCs recover the HST paid on business purchases — including tools, fuel, vehicle expenses, materials, accounting fees, and equipment — provided these are used in commercial activities and supported by proper documentation.
Payroll Source Deductions and Remittance Due Dates
Contractors who hire employees must withhold and remit CPP contributions, EI premiums, and income tax from every payroll. The remittance frequency — monthly, accelerated bi-weekly, or accelerated weekly — depends on the contractor’s average monthly withholding amount (AMWA) as determined by the CRA’s remitter classification.
Late payroll remittances attract penalties of 3% for amounts 1–3 days late, 5% for 4–5 days, 7% for 6–7 days, and 10% for amounts more than 7 days overdue or not remitted at all. Repeated late remittances within a calendar year can double these penalties to 20%.
Record Retention (6-Year Rule)
The CRA requires contractors to retain all business records for a minimum of 6 years from the end of the last tax year to which they relate. Records include invoices, receipts, bank statements, subcontractor contracts, T5018 copies, payroll records, vehicle mileage logs, and all documentation supporting deductions claimed on T2 or T2125 returns.
Bookkeeping & Monthly Close
Job-costed chart of accounts configured for construction, with monthly bank and credit card reconciliation, vendor payment tracking, and project-level financial reporting.
HST Setup & Filing + ITC Optimization
GST/HST registration, return preparation and filing, and systematic ITC recovery on all eligible business expenses — tools, fuel, materials, professional fees, and equipment.
Payroll Setup & Remittances
Payroll account registration, source deduction calculations (CPP, EI, income tax), remitter type classification, and on-time remittance filing to prevent CRA penalties.
T5018 Subcontractor Reporting
Tracking all subcontractor payments, preparing T5018 slips for every qualifying vendor, and filing the T5018 summary within the 6-month CRA deadline.
Corporate Tax (T2) & Year-End Filing
Annual T2 Corporation Income Tax Return preparation and mandatory e-filing for incorporated contractors. Includes financial statement preparation, CCA schedules, and deadline management within 6 months of fiscal year-end.
Sole Proprietor Tax (T2125) & Expense Substantiation
T2125 preparation with defensible expense documentation — vehicle logbooks (Chart A), home office calculations, tool and equipment receipts, and CCA class assignments.
A profitable contractor with poor job costing is blind to which projects make money and which erode margins. Acctax implements job costing systems that track 10 cost dimensions per project, providing real-time visibility into estimated versus actual costs, margin performance, and unbilled work.
| Job Costing Field | What It Tracks | Why It Matters |
|---|---|---|
| Job ID | Unique project identifier | Links all costs and revenue to a single project |
| Customer / Site | Client name and project location | Enables per-client profitability analysis |
| Estimate | Original bid or contract value | Baseline for variance tracking |
| Actual Labor | Crew hours × rates | Largest controllable cost on most projects |
| Materials | All materials purchased for the job | Tracks cost overruns vs. estimate |
| Subcontract Costs | Payments to subcontractors | Bridges to T5018 reporting |
| Equipment | Rental, fuel, depreciation allocation | Often undertracked; leaks margin |
| Overhead Allocation | Insurance, office, admin pro-rated | Ensures full cost visibility per project |
| Change Orders | Scope additions approved by client | Prevents unbilled work from eroding profit |
| Holdback (10%) | Amount retained per Construction Act | Tracks receivable timing and cash flow impact |
The WIP reporting workflow follows 5 steps:
Estimate & Budget
Budget Load
Cost Tracking
Progress Draws
WIP Reconciliation
At Step 5, the WIP schedule compares costs incurred to date, revenue billed to date, and earned revenue based on completion percentage. This reconciliation identifies underbilling (you’re financing the client) and overbilling (cash flow appears inflated). Both are invisible without a functioning WIP system.
Contractor vs. Employee Classification Risk
The CRA evaluates the total relationship between a payer and a worker to determine status. Factors include the degree of control, provision of tools, level of financial risk, and the ability to subcontract. Misclassification exposes you to retroactive CPP/EI assessments and penalties.
Vehicle & Travel Documentation
CRA requires a contemporaneous mileage logbook documenting date, destination, and business purpose. The business-use percentage derived applies to fuel, insurance, and lease costs. For 2026, the prescribed automobile allowance rate is $0.73 per km for the first 5,000 km.
Capital Assets & Depreciation (CCA Classes)
Proper classification directly affects taxable income. Common classes for contractors:
- Class 8 (20%): Tools over $500, office furniture
- Class 10 (30%): General-purpose trucks and vans
- Class 12 (100%): Tools under $500 (Small tools)
- Class 50 (55%): Computer hardware and systems
ITC Eligibility Checkpoints
Input Tax Credits recover HST paid on business purchases. Claims must be supported by documentation showing the Vendor GST/HST number. Thresholds for documentation detail are $100 and $500 for 2026 compliance.
Discovery
We review your current books, CRA account status (Business Number, GST/HST, payroll, corporate tax), WSIB registration, and business structure to identify compliance gaps and financial risks.
Cleanup
We reconcile historical transactions, correct misclassified entries, file overdue returns where applicable, and bring your records to a current, audit-ready state.
System Setup
We configure a job-costed chart of accounts in cloud-based accounting software, integrate bank and credit card feeds, establish holdback tracking, and set up subcontractor payment tracking for T5018 compliance.
Monthly Reporting
Ongoing bank reconciliation, expense categorization, job cost updates, HST return preparation, payroll processing, and WIP reporting — delivered on a consistent monthly schedule.
Year-End & Planning
Annual tax return preparation (T2 or T2125), T5018 filing, CCA schedule calculations, financial statement preparation, and forward-looking tax planning for the next fiscal year.
Serving Ontario’s Construction Trades: Electrical, Plumbing, HVAC, Drywall, Roofing, Concrete, Framing, Painting, Landscaping, Excavation, and General Contracting.
FAQs About Contractor Accounting in Ontario
Ontario's expanded compulsory coverage requires all individuals who own or run a construction business to register with the WSIB and maintain coverage, with or without employees. This includes independent operators, sole proprietors, partners, and executive officers of corporations engaged in construction activities (Class G). The limited exception applies to contractors directly retained by a homeowner for work on their own private residence (home renovation exemption). Subcontractors retained by another contractor on the same project are not exempt.
A WSIB clearance is a document confirming that a construction business is registered with the WSIB and has an account in good standing — all premiums reported and paid. Clearances are valid for up to 90 days. Principals (general contractors and property owners) are legally required to obtain or require clearances before construction work begins. Operating without a valid clearance can result in refusal of site entry and loss of the contract.
A T5018 slip must be issued when construction activities account for more than 50% of your business income and you made payments exceeding $500 (excluding GST/HST) to a Canadian-resident subcontractor during the reporting period. The slip reports the total contract payments made, including applicable GST/HST. Payments made by cash, cheque, barter, or offset are all reportable. Non-construction services such as bookkeeping, legal fees, and janitorial services are excluded.
The T5018 filing deadline is 6 months after the end of the contractor's chosen reporting period — either the calendar year or the corporation's fiscal period. For contractors reporting on a calendar-year basis, the deadline is June 30 of the following year. For tax years beginning after 2023, the CRA requires electronic filing if more than 5 T5018 slips are issued.
Ontario's Harmonized Sales Tax rate is 13%, composed of 5% federal GST and 8% provincial component. HST applies to all taxable construction services and materials supplied in Ontario.
GST/HST registration becomes mandatory when total taxable revenues exceed $30,000 over four consecutive calendar quarters. The contractor has 29 days from the date the threshold is exceeded to register. Most active Ontario contractors cross this threshold within their first year. Voluntary registration before reaching $30,000 enables the contractor to claim Input Tax Credits on business purchases immediately.
The CRA requires contractors to retain all business records for a minimum of 6 years from the end of the last tax year to which they relate. Records include invoices, receipts, bank statements, mileage logs, subcontractor contracts, T5018 copies, payroll documentation, and all supporting materials for deductions claimed.
All resident corporations must file a T2 Corporation Income Tax Return every year, even if the corporation had no income or no tax payable. The T2 must be filed within 6 months of the fiscal year-end. Mandatory e-filing applies for tax years beginning after 2023, with a $1,000 penalty for non-compliance.
The T2 Corporation Income Tax Return is due within 6 months of the corporation's fiscal year-end. For a December 31 year-end, the filing deadline is June 30. Any taxes owing must be paid within 2 months of year-end (3 months for certain small CCPCs) to avoid interest charges.
Book an Ontario Contractor Accounting Call
Get job costing, compliance, and tax filings handled by accountants who understand construction finances. Acctax responds within 1 business day.
If you’re incorporated, our corporate tax filing (T2) service keeps deadlines and mandatory e-filing compliant.
If you’re self-employed, we organize your T2125 reporting with defensible expense tracking and CCA documentation.
