Ontario Construction Mid-Year Review 2026: Job Costing, WIP, and Holdback Before Q3

Reviewed by Bader A. Chowdry, CPA, CA, LPA on July 13, 2026

Halfway through the 2026 construction season is the single best moment to look hard at your numbers. Backlog is booked, crews are in the field, and there is still enough runway to fix a mispriced job or a cash-flow gap before it hardens into a December year-end surprise. For Ontario builders, 2026 adds a new reason to review mid-year: the most significant Construction Act amendments in decades took effect on January 1, and they change how and when cash actually moves on your projects.

This is a management-accounting review, not a tax-filing checklist. It is about job costing, work-in-progress, and holdback — the numbers that tell you whether the season is actually profitable while you can still do something about it. (For the July HST instalment and filing dates, see our Q2 HST instalment deadline guide — this post links to it rather than repeating it.)

Why do a mid-year financial review as an Ontario construction company?

Because a year-end review only tells you what already happened. A mid-year review, run in July, catches cost overruns, billing gaps, and holdback exposure while the season is still live and change orders can still be re-priced. With the 2026 prompt-payment and annual-holdback-release rules reshaping cash flow, waiting until December to find a problem is the most expensive option on the table.

How accurate is your job costing halfway through 2026?

Construction job costing means allocating every direct labour hour, material invoice, subcontractor payment, and applied burden rate to the specific project that consumed it. Halfway through the year, pull an estimate-versus-actual report for each active job. Any project trending 8% or more over on labour or burden is a live warning — and it is far cheaper to address in a July change order than in a year-end write-down.

How should work-in-progress (WIP) be recognized?

Most Ontario contractors recognize revenue using percentage-of-completion: you book revenue in proportion to costs incurred against total estimated costs. The output is an over/under-billing schedule — “costs and estimated earnings in excess of billings” (under-billing) versus “billings in excess of costs” (over-billing). That schedule matters for both your tax position and how your lender reads your file. Smaller, short-duration jobs may instead use the completed-contract method.

The 10% holdback you must account for correctly in 2026

Under Ontario’s Construction Act, every payer holds back 10% of the value of services and materials as they are supplied. In your books that holdback is a distinct liability (amounts you retain from subcontractors) and a receivable (amounts owners retain from you) — it is not revenue you can spend. The big 2026 change: basic holdback must now be released annually, calculated from the anniversary of when holdback first arose on a project, once the lien period for that annual cycle expires without a preserved lien. That accelerates cash you used to wait years for — but only if your holdback ledger is accurate. A messy holdback account is the most common reason a mid-year review turns up a cash-flow gap. On a $1.2 million contract, for example, the 10% basic holdback is $120,000 sitting in trust — money that is neither yours to spend nor, until the annual release is triggered, yours to collect. Track it as its own ledger line, not buried in accounts receivable.

Prompt payment and adjudication: the cash-flow clock

The 2026 regime puts hard deadlines on payment. Once an owner receives a proper invoice, it must pay within 28 days or issue a notice of non-payment within 14 days; each party downstream must then pay within 7 days of receiving funds. Miss the window and the invoiced amount is deemed payable, with interest. Disputes now flow to adjudication — expanded in 2026 to cover scope of work, change-order pricing, and time extensions, administered through ODACC. The practical accounting takeaway: your billing and invoice-approval process is now a cash-flow lever, not just paperwork. Tighten your proper-invoice checklist so the 28-day clock starts on time.

The Q3 loose ends to close before you scale up

A mid-year review also closes the compliance items that quietly accrue interest and penalties: your Q2 HST instalment and filing under the ETA (see the Q2 HST deadline guide); any outstanding T5018 Statement of Contract Payments reconciliation (under CRA administrative policy, calendar-year filers report subcontractor payments over $500 and file by June 30; the CRA uses the T5018 program to reduce the construction underground economy); and your WSIB reconciliation, where mid-year payroll drift routinely creates a premium adjustment. The CRA charges instalment interest that compounds daily, so a July catch-up is cheaper than a Q4 reassessment. Reconcile what you owe the CRA now, while payroll is steady.

Build a mid-year project profitability scorecard

Bring it together in one page. For each active project, list: contract value, costs to date, estimated cost to complete, percentage complete, billings to date, over/under-billing position, and gross-margin variance versus bid. Sort by margin variance. The two or three jobs at the bottom are where your July attention pays for itself — through re-priced change orders, tighter WIP recognition, or a corrected under-billing that was masking a cash squeeze. A CPA Ontario licensed firm can build the scorecard with you and sign off on the WIP methodology your lender and the CRA will accept.

Mid-year in practice

Consider a composite Mississauga general contractor. On a $1.2 million job, a July job-costing review flags labour burden running 8% over budget — roughly $18,000 of unrecovered cost. The contractor re-prices two pending change orders to recover the overrun, and uncovers a $42,000 under-billing on a third job — real work performed but not yet invoiced — that had been quietly masking a cash squeeze against payroll and subcontractor holdback obligations. None of it was visible in the bank balance; all of it was visible in a proper WIP schedule. That is the entire case for reviewing in July instead of December.

Frequently asked questions

What is the holdback percentage in Ontario in 2026?

The basic statutory holdback under the Construction Act remains 10% of the value of services and materials supplied. What changed on January 1, 2026 is timing: holdback must now be released on an annual basis for all contracts, rather than held to substantial completion.

Should I use percentage-of-completion or completed-contract?

Longer, multi-period projects generally use percentage-of-completion, recognizing revenue as costs are incurred against total estimated costs. Short-duration jobs may use completed-contract, recognizing revenue only when the job is done. Your method should be consistent and documented; a CPA can confirm the right treatment for your mix of work.

Why review mid-year instead of at year-end?

A July review leaves time to re-price change orders, correct billing, and fix holdback and WSIB reconciliation gaps before the season closes. A December review can only report the outcome — the correction window is gone.

Do I still owe Q2 HST in July?

Yes. Your Q2 HST instalment and filing obligations under the ETA are due regardless of the mid-year review — see our Q2 HST instalment deadline guide for the exact dates and interest treatment.

This article is for general information only and is not professional advice. Tax and accounting outcomes depend on your specific facts; please consult a qualified professional before acting. Reviewed by Bader A. Chowdry, CPA, CA, LPA at Insight Accounting CPA Professional Corporation. Insight Accounting CPA Professional Corporation is a licensed public accounting firm authorized under the Public Accounting Act, 2004 (Ontario) and regulated by CPA Ontario.