Construction and Trades Accounting in Alberta
The money you have earned and the money you can spend are two different figures on a construction job, and the gap between them is the holdback. It sits with the owner while the lien period runs, which is how a profitable contractor still ends up short of cash in November.
Tax follows the same logic. What a contractor reports in a year turns on when an amount became receivable rather than when the work got done, and there are filings in this industry that most businesses never have to make.
A holdback is earned, invoiced, and not yet income
A progress billing becomes receivable, and therefore income, when the purchaser or the purchaser’s architect or engineer approves it for payment. The holdback withheld from that billing is treated separately. It becomes receivable on the later of the day the architect or engineer issues the final certificate of completion and the day the lien period under the applicable provincial statute expires.
That distinction is worth real money at year-end. Holdbacks on jobs still running are not yet income, and books that record every invoice as revenue on the day it was issued will overstate the year and the tax with it. The same reasoning applies to holdbacks you are withholding from your own subcontractors, so the treatment has to be applied consistently on both sides rather than whichever way happens to suit.
Prompt payment moved the dates
Under the Prompt Payment and Construction Lien Act, an owner has 28 calendar days from receiving a proper invoice to pay the amount payable, and the contractor then has 7 calendar days from being paid to pay each subcontractor. Holdback release changed as well. On longer projects it is released annually unless the contract sets out phased or progressive releases.
The words that matter there are the ones about clarity. Where a contract is ambiguous about what the phases are, the annual release applies by default, and a contractor who built a cash flow forecast around phased release finds the money arrives a year later than planned.
Two filings your suppliers in other industries never make
T5018, for what you paid your subcontractors
If more than half of your business income comes from construction activities, you report what you paid subcontractors for construction services on a T5018 information return. A slip goes out for each subcontractor paid more than 500 dollars in the reporting period, GST excluded, and the return is due within six months of the end of the period it covers.
You choose whether that period follows your calendar year or your fiscal year, and having chosen it you stay with it. The form itself is straightforward. The difficulty is having supplier records clean enough at year-end to separate construction services from materials-only purchases, which is a bookkeeping decision made twelve months earlier, not a year-end one.
WCB clearance, before the crew arrives
Hire a subcontractor without WCB-Alberta coverage and you can end up responsible for premiums on their earnings. Pay a subcontractor who has an outstanding balance on their own account and you can become responsible for that balance too. A clearance letter requested before the subcontractor starts confirms who is covered, under which industry, and whether the account is in good standing.
This is the cheapest control in the industry and the one most often skipped when a crew is needed on Monday. Requesting clearance is free, takes minutes, and is the only thing standing between you and somebody else’s premium bill.
When you build to sell or to rent, GST changes shape
A builder who constructs a residential unit and then rents it out rather than selling it is treated as having sold the property to itself. The self-supply rule applies at the later of the point construction or substantial renovation is substantially complete and the point possession is given under a lease or similar arrangement, and the GST is calculated on the fair market value of the building and land together.
Two things make this expensive when it is missed. It produces a tax bill with no sale and therefore no cash behind it, and it is triggered by an operational decision, holding a unit back for rent, that nobody thinks of as a tax event. Rebates may reduce the result, but they have their own conditions and their own deadlines. If a unit is going to be rented rather than sold, that is a conversation to have before possession, not at the next year-end.
How we work with contractors and trades
A two-truck trade contractor and a general contractor carrying six subs on a commercial job need different things. What they share is that the accounting has to follow the job, not the calendar.
- Corporate and personal returns, with holdback and progress billing timing applied properly rather than taken straight off the invoice list.
- T5018 information returns, prepared from supplier records set up during the year to make the split possible.
- GST registration and filing, including how new residential work and self-supply affect what you owe.
- Job-level bookkeeping, so you can tell which contracts made money and which ones only looked busy.
- Payroll and WCB-Alberta together, with clearance letters tracked for every subcontractor you engage.
- Equipment purchase and lease decisions, reviewed before the year closes rather than after.
Questions we get from producers
Generally not yet. A holdback becomes receivable, and therefore income, on the later of the day the architect or engineer issues the final certificate of completion and the day the lien period expires. The progress billing net of the holdback is income earlier, when it is approved for payment. Books that treat the full invoice as revenue on its issue date will overstate the year.
Anyone whose business income is more than 50 percent from construction activities, reporting payments made to subcontractors for construction services. A slip is issued for each subcontractor paid more than 500 dollars in the period, GST excluded, and the return is due six months after the period ends. You can report on a calendar or fiscal basis, but you stay with the one you pick.
You may well be. Where a subcontractor has no coverage, WCB-Alberta may treat them as your worker and charge premiums on their earnings to your account. Paying a subcontractor who owes premiums on their own account can also make you responsible for that balance. Ask for a clearance letter before the work starts.
Yes, and it is the situation that catches builders hardest. The self-supply rule treats you as having sold the property to yourself at fair market value once construction is substantially complete and possession is given under a lease, so GST becomes payable without a sale to fund it. Rebates may apply but have their own conditions. Raise it before possession.
It depends on whether profits consistently exceed what you draw out, and on how your contracts are structured. If you work almost exclusively for one general contractor through a corporation, the personal services business rules are worth reviewing first, because they can remove most of the deductions incorporation was meant to preserve. Model it against your actual numbers.
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