Deposits, progress billings and when GST/HST is actually due

GST/HST on a construction job is generally payable on the earlier of the day you are paid and the day the amount becomes due — and “becomes due” usually means the date printed on the invoice, not the day you got around to sending it. A deposit held as security is the exception: it generally carries no tax until you apply it against the price. A holdback is the other exception, and it runs on the lien period instead. Everything else on a progress draw is taxable in the reporting period the draw was billed in, whether the owner has paid you or not.

None of that turns on when money lands in the account. That is how a contractor ends up remitting tax on a draw nobody has paid, and missing the tax on a deposit taken eight months earlier.

The rule is paid or payable, whichever lands first

Tax on a supply generally becomes payable on the earlier of two days: the day the consideration is paid, and the day it becomes due. The first is easy to find in a bank statement. The second is where the money is.

An amount generally becomes due on the earliest of these:

• The day you first issue an invoice for it.
• The date appearing on that invoice.
• The day you would have issued an invoice, but for an undue delay.
• The day the customer is required to pay under a written agreement.

Three of those four are dates you control, and one is a date you type. The fourth belongs to your contract: an agreement requiring the owner to pay within a set number of days of each certified draw fixes its own date. Read the payment clause before you assume your invoicing sets the timing.

The date on the invoice and the day you send it are two different dates

An invoice dated December 28 and emailed on January 6 generally makes the tax payable in December, because the earlier of the two dates governs. For a quarterly filer that moves the whole amount into the return before it, on money the owner has not paid and may not pay for another month.

The rule runs backwards too. Dating an invoice to the end of a finished job you actually billed three weeks later pulls the tax back with it, and the undue-delay line closes the other side: sitting on the paperwork does not push the tax out indefinitely.

Monthly and quarterly filers file and pay one month after the reporting period ends, so the gap between remitting and collecting is real cash.

A deposit and a prepayment are different things

A deposit given as security for a supply is generally not consideration for that supply until you apply it against the price. Hold C$10,000 taken in March as refundable security and no tax is generally payable on it then. Apply it to the first draw and it becomes consideration at that moment, with the tax payable then.

A prepayment is not the same animal. Money taken on account of the price is consideration paid, and the tax on it is generally payable when you receive it. What separates the two is the contract and how the money actually behaves — held and refundable, or applied and gone. An invoice that charges tax on the deposit is you deciding it was a prepayment all along.

The failure is almost never the March analysis. It is September, when the deposit gets applied against a draw, nothing in the bank statement moves, and no one records that a taxable event just happened.

Substantial completion is the backstop under everything still unbilled

Progress billing does not let an unbilled tail sit outside the system while a punch list gets argued about. Under a written agreement for the construction, renovation or alteration of real property where the price is payable on a progress basis, tax on any part of the price that has been neither paid nor become due generally becomes payable no later than the end of the month following the month in which the construction is substantially completed.

So the last draw has an outside date whether or not anyone has issued it. Holdbacks are carved out of that backstop.

The holdback is the one amount that waits

Tax on a holdback generally becomes payable on the earlier of the day the holdback is paid and the day the lien period expires, so it is not remitted with the rest of the progress billing. The income side runs on its own clock again: amounts held back under a construction contract or provincial lien legislation are generally not included in income until you have a right to receive them. The two clocks, and what they do to a year-end, are here.

Income and GST/HST are answering different questions

A draw schedule is a payment schedule, not a revenue schedule, and the two agree only by accident.

On an accrual basis an invoice issued before year-end is revenue of that year whether the customer has paid or not. Work done and not yet billed is the other half, and that question belongs to the year-end guide. Money received before the work is done is a third case: it generally comes into income, with a reserve available for the part relating to services still to be rendered, claimed on the return and added back the following year.

A worked example: one C$100,000 renovation and four moments

Illustrative, round numbers, December 31 year-end, quarterly filer. A renovation company signs a C$100,000 contract in February: a C$10,000 deposit, then three draws, with the owner retaining a holdback out of each certified draw. The point is which reporting period each amount lands in, not what the tax totals.

The C$10,000 deposit arrives in March, held under the contract as refundable security and posted as a liability, so no tax is payable on it then. The first draw of C$40,000 is invoiced on June 20 and paid July 12, so the tax became payable in June and goes on the return for the quarter ending June 30, due July 31. The cash arrived before the return did, which is a fact about this job rather than about the rule.

September is where the deposit resurfaces. The second draw of C$30,000 goes out, the deposit is applied against it, and applying it is what turns the C$10,000 into consideration — six months after the cash came in. If nobody records the application, the tax is missing from the September quarter and no bank entry will point at it.

The final draw of C$20,000 carries an invoice dated December 28, prepared and emailed on January 6. The earlier date governs, so it belongs to the quarter ending December 31 and goes in on the return due January 31, before the owner has paid any of it. The C$9,000 of holdback carved out of the three draws is in none of those quarters: its tax waits for the earlier of payment and the expiry of the lien period, which lands in February.

One contract, four moments where the tax moved, and only the holdback has any chance of moving on the same day as the cash.

The ledger needs dates, not just amounts

Every draw line carries four: the date on the invoice, the day it was issued, the day payment is required under the contract, and the lien-expiry date on the holdback slice. Deposits carry a fifth, the day they were applied, because that is the only one that produces a taxable event and nothing else in the file will remind you of it.

What Cadence does

For contractors and trades, we set the ledger up to carry those dates, so deposits sit as liabilities until the day they are applied and each draw is filed by its earliest date. Holdbacks are tracked separately, with the lien-expiry date on the line, so the tax on them lands in the period it belongs to rather than in the one you billed. GST/HST returns and remittances are included in the year-round packages and available as an add-on to the annual-returns tier; the pricing page has the starting fees. Where a contract’s payment terms change the timing on a job you are halfway through, that is a conversation for the quarter it happens in, not the return after it.