How to Complete T5018 for Contract Payments

If you are a newcomer running a construction business in Canada, or if you work as a general contractor who hires subcontractors, you need to know about Form T5018, Statement of Contract Payments. This form is specific to the construction industry and requires you to report payments made to subcontractors so the CRA can verify that everyone is paying their fair share of taxes.

What Is the T5018?

The T5018, "Statement of Contract Payments," is an information return that construction businesses file with the CRA. It reports the total amount paid to each subcontractor during the reporting period. Think of it as similar to a T4 slip (which reports employment income), but for subcontractor payments specifically in construction.

The CRA uses this information to cross-reference the income reported by subcontractors on their own tax returns. This helps reduce the underground economy in construction, which is one of the sectors with the highest rates of unreported income.

Who Must File T5018?

You must file T5018 if:

• Your primary business activity is construction (including renovations, repairs, land clearing, excavation, and related activities)
• You made payments of $500 or more to any subcontractor during the reporting period
• The payments were for construction services (not for materials purchased from a supplier who did not provide labour)

Businesses in these categories must file:

• General contractors
• Renovation companies
• Specialty trade contractors (electrical, plumbing, HVAC, roofing, etc.)
• Home builders
• Land developers who manage construction

"Construction activities" is broadly defined. It includes building, renovating, repairing, maintaining, or demolishing any type of structure, including residential, commercial, and industrial buildings, roads, bridges, and other infrastructure.

What Information to Report

For each subcontractor to whom you paid $500 or more, you must report:

• The subcontractor's name and address
• Their Business Number (BN) or Social Insurance Number (SIN)
• The total amount paid during the reporting period (including GST/HST)

Getting the Subcontractor's Tax Information

Before paying any subcontractor, request their BN or SIN. If they are an incorporated company, they should have a BN. If they are an individual sole proprietor, you may need their SIN. If the subcontractor refuses to provide their tax number, you must still file the T5018 and note that the number was not provided. The CRA may follow up with the subcontractor directly.

Step-by-Step Filing Process

Step 1: Determine Your Reporting Period

Your T5018 reporting period is typically the same as your fiscal year. For sole proprietors, this is January 1 to December 31. For corporations, it matches your corporate fiscal year-end.

Step 2: Compile Payment Records

Go through your records and list every subcontractor you paid $500 or more during the reporting period. Include:

• Invoice amounts paid
• Progress payments
• Holdback amounts (report holdbacks in the period they are paid, not when they are held back)

Step 3: Complete the T5018 Slips

For each subcontractor, complete a T5018 slip with their identifying information and total payment amount. You can prepare these using:

• The CRA's Internet Filing application for information returns
• Commercial accounting software that supports T5018 filing
• Paper forms (available from the CRA website)

Step 4: Complete the T5018 Summary

The summary form totals all the individual T5018 slips. It includes your business information, reporting period, and the total number of slips and total amount reported.

Step 5: File with the CRA

File the T5018 summary and all slips with the CRA within six months after the end of your reporting period. For example, if your fiscal year ends December 31, your T5018 is due by June 30 of the following year.

You can file electronically through the CRA's Internet filing service (recommended) or by mailing paper forms to the Ottawa Technology Centre.

Step 6: Provide Copies to Subcontractors

You do not need to send copies of the T5018 slips to your subcontractors, but it is good practice to do so. This helps them verify that the amounts match their records and report the correct income on their own tax returns.

Penalties for Not Filing

The CRA takes T5018 filing seriously. Penalties for late or non-filing include:

• $25 per day for each day the return is late, with a minimum penalty of $100 and a maximum of $2,500
• Additional penalties for repeated failures to file in subsequent years
• If you deliberately do not file, the CRA can impose a penalty of $1,000 to $12,000

Common Mistakes

1. Not filing at all: Many small construction businesses are unaware of the T5018 requirement. If you pay subcontractors in construction, you must file.
2. Including material-only purchases: If you bought materials from a supplier who only sold you goods (no labour), you do not report this on T5018. The form is specifically for construction services.
3. Reporting holdbacks in the wrong period: Report holdback payments in the period they are actually released to the subcontractor, not when the work was done.
4. Missing the deadline: The six-month deadline after your fiscal year-end is generous, but it still catches people off guard. Put it in your calendar.

Tips for Newcomer Contractors

• Set up a system from day one to track all subcontractor payments. Use accounting software like QuickBooks, Wave, or FreshBooks.
• Collect BN or SIN information from every subcontractor before making the first payment. This is much harder to get after the fact.
• Consider using a bookkeeper or accountant who is familiar with construction industry requirements.
• Keep copies of all subcontractor invoices and proof of payment for at least six years.

For related business guides, see our guide to RC1 business number registration, how to apply for a GST/HST number, and our guide to CPP contributions. Visit our resources page for more newcomer support.

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