Most Canadians with T4A income overpay tax simply because they don’t understand how business expenses and GST really work — don’t let that be you.
Learn which business expenses you can legally deduct, how GST/HST impacts your tax return, and the exact steps to avoid costly mistakes with your T4A income.
If you earned income reported on a T4A slip this year, you’re not just a taxpayer — you’re operating a business in the eyes of the Canada Revenue Agency (CRA). And that changes everything. Unlike T4 employment income, T4A income opens the door to legitimate business expense deductions and potential GST/HST considerations that can significantly reduce your overall tax bill. The problem? Many freelancers, contractors, consultants, and side-hustlers either don’t know what they’re allowed to claim or assume they can’t deduct much at all. As a result, they overpay taxes year after year.
Understanding how to properly report your T4A income on Form T2125, which expenses qualify as deductible, and how GST/HST works — especially if you’re not yet registered — can make a meaningful difference in your net income. In this guide, we’ll break down exactly what you can claim, how GST impacts your expenses, and how to structure things correctly so you stay compliant while keeping more of what you earn.
1. T4A Income and Business Expense Deductions
What a T4A is (and isn’t)
A T4A slip reports income you received as a self-employed person / contractor / consultant, not employment wages. For example, if a client paid you for consultancy work and reported it on a T4A in Box 48, that’s business income — and you treat it accordingly on your tax return.
That means you:
Report that T4A income on Form T2125 (Statement of Business or Professional Activities).
Report eligible business expenses on that T2125, lowering your net business income.
Examples of deductible expenses include things like software subscriptions, office supplies, travel (business-related portions), rent for business space, advertising, etc.
Important: You can only deduct expenses that are reasonable and incurred to earn that income — the same rule that applies to all self-employment (T2125) expense claims.
2. Can You Claim GST/HST Paid on Expenses Without a GST Number?
What GST Input Tax Credits (ITCs) Are
When a business is registered for GST/HST, it can generally claim back the GST/HST it paid on purchases and expenses used in its taxable business activities — this is called an Input Tax Credit (ITC).
To claim an ITC you must:
Be registered for GST/HST during the period the GST was paid or became payable (paid when invoice is issued, or payable if not yet paid).
Have proper documentary evidence (receipts showing GST and vendor GST number, etc.).
If You Don’t Have a GST Number
If you weren’t registered for GST during 2025 when you earned the T4A income:
You cannot claim ITCs for GST you paid on business expenses during that period. The CRA requires you to be registered at the time the GST was paid or became payable in order to be eligible.
Instead, for your income tax return (T1), you include your business expense amounts including GST on your T2125, so the GST you paid also reduces your net income for income tax purposes. This is how people handle it when they don’t have a GST account.
So essentially:
No GST number yet → you can deduct the full expense (including the GST portion) on your income tax return, but you cannot separately claim the GST back as an ITC. The Refund amount would also differ if you claim GST and if you don’t.
3. Getting a GST/HST Number
When You’re Required to Register
In Canada, you must register for GST/HST if:
Your total taxable sales exceed $30,000 in four consecutive calendar quarters (small supplier threshold), OR
You choose to voluntarily register even if below that threshold.
You register through CRA’s business number system — either online or by phone.
4. Backdating GST/HST Registration — What’s Possible?
Can CRA Backdate Your GST Account?
Yes — but this is a complex, discretionary process.
CRA can accommodate backdating GST registrations in some cases to allow claiming input tax credits for prior periods — but:
It requires you to demonstrate that you were required to register (i.e., you were not a “small supplier” because you exceeded $30,000).
You must often provide evidence of your income from invoices or books and show continuous commercial activity.
CRA has discretion over backdating; they don’t guarantee approval.
Note: Some firms suggest a voluntary disclosure (VDA) before backdating to fix years of non-registration and to avoid penalties.
What Backdating Actually Affects
If CRA agrees to backdate your GST registration to a past date:
You may be eligible to claim ITCs for GST you paid on business expenses from that backdated effective date onward.
But CRA generally only considers GST paid during the period you are considered a registrant.
So if you request an effective date of Jan 1, 2025, but CRA only backdates to March 15, 2025, you’ll only be eligible for ITCs from March 15 onward.
Practical Limitations
There are some practical restrictions in the CRA guidance:
If GST was paid before your registration date, you typically cannot claim ITCs for those earlier GST amounts.
There are some limited exceptions (e.g., prepayments for services consumed after registration), but they’re narrowly scoped and technical.
5. What It Means for Your 2025 Taxes
Business Income
Your T4A income goes on T2125 as self-employment income.
You record all legitimate business expenses — including GST you paid — to reduce your taxable income if you were not registered.
GST/ITC Treatment
If you:
Get a GST number in 2026 and request CRA to backdate it to Jan 1, 2025 (or close):
CRA may approve an earlier effective date.
Then you could potentially file past GST returns (or amended ones) for the periods you were backdated, and claim ITCs for expenses during that time.
But CRA won’t let you claim ITCs for GST paid before the effective backdated registration. The clock starts when CRA says you became registered for GST.
How to Request Backdating from CRA
Here’s a straight-forward process you can follow:
1. Apply for a GST/HST Account
Go to CRA’s My Business Account or call CRA to open a GST/HST account and choose a requested “effective date” based on when you think you first exceeded the small supplier threshold or started commercial activity.
CRA will assign an effective date — possibly earlier than the date you filed and this might take around 5 weeks to get processed by the CRA.
2. Provide Documentation
CRA may ask for (not necessarily for everyone though):
Copies of your invoices showing your T4A income.
Records showing taxable supplies and income.
Expense receipts with GST amounts.
The goal is to show CRA that you were making taxable commercial activity from the backdated period.
3. Voluntary Disclosure (If Needed)
If CRA is hesitant or you’ve missed filing GST returns historically, a Voluntary Disclosure Application (VDA) can help:
This must disclose past GST-HST filing omissions.
It can help you avoid penalties and interest.
If accepted, CRA might more readily agree to backdate the effective date.
A tax professional’s help here is often worth it.
In Short
Paid GST on Business Expenses?
Here’s What You Can (and Can’t) Claim
1. Revenue & Business Identification
Before claiming expenses, the questionnaire will ask you to describe the business and income source — e.g., that your T4A income was from consulting/contract work — because that determines which expense categories apply.
2. Common Categories of Business Expenses You Can Claim
These are current expenses you paid to earn your self-employment/T4A income. They reduce your net income on your tax return and can also generate GST/HST input tax credits (ITCs) if you are registered and eligible.
Advertising & Marketing
Website costs, social media ads, business cards, flyers, online ads.
Helps promote your services.
Includes GST/HST paid (you claim ITCs if registered).
Meals & Entertainment
Business meals when meeting clients.
Only 50% of meal/entertainment costs are normally deductible.
Bad Debts
Amounts you included in income but can’t collect.
You need evidence of attempts to collect.
Insurance
Business liability insurance, professional indemnity.
GST/HST included if paid to a registrant.
Interest & Bank Charges
Interest on business loans, credit cards.
Fees and charges related to business finances.
Business Taxes, Licences & Memberships
Business licence fees, professional dues, trade association memberships.
GST/HST may be included — you can claim ITCs if registered.
Office Expenses
Stationery, small equipment, stamps, printing, software subscriptions.
GST/HST applies; claim ITCs if registered.
Professional Fees & Legal/Accounting
Accountant, bookkeeper, lawyer costs.
Fees for preparing your taxes and books. GST included here too if registrant.
Motor Vehicle & Travel
Costs to run a car used for business:
Fuel, maintenance, insurance portion tied to business use.
Parking, business travel (flights, hotels).
Note: Only business portions count.
Travel:
Transportation, accommodation, business-related travel.
Meal portion still subject to 50% rule.
Business-Use-of-Home
If you work from home:
Portion of rent, utilities, heating, internet, property tax tied to your workspace.
GST/HST applies to some home costs; ITC eligibility depends on registration and use.
Supplies, Freight & Delivery
Tools, business materials, freight charges.
GST/HST on items from registrants can lead to ITCs.
Repairs & Maintenance
Repair costs for business equipment or workspace.
Deductible if ordinary and necessary. GST/HST included.
3. Capital Expenses (CCA — Depreciable Property)
This category covers things that you don’t deduct fully in one year but claim a portion through Capital Cost Allowance:
Computers, laptops, printers
Office furniture, equipment
High-value tools (over a certain threshold)
These items are capital property. You claim a percentage of the cost each year based on CRA classes (e.g., class 50 for laptops). GST/HST paid on capital property may be eligible for ITCs if you are GST registered.
Note: Capital items aren’t a “current” expense but part of capital cost allowance schedules.
4. How GST/HST Works With These Expenses
🟢 When You Are GST Registered
You can claim input tax credits (ITCs) for the GST/HST included on eligible business purchases and expenses.
To claim ITCs, you must have receipts and the GST number of the vendor.
On your T2125, you reduce the business expense amounts by any ITC claimed before entering them as deductions.
🔴 When You Are Not GST Registered
You cannot claim ITCs.
But you can claim the full cost of the expense (including GST/HST) on your T2125 as a business expense — it still reduces your income tax.
Essentially, if you pay $1,130 including 13% HST for a business purchase and you knew you couldn’t claim ITCs, you’d deduct the full $1,130 on your T2125 expense line.
5. Checklist of Expenses
Moost business expense questionnaires ask about these categories:
Revenue & business identifiers
✔ Business name or trade name
✔ Period of activity
✔ T4A income amount
Expenses claimed
✔ Advertising & marketing
✔ Meals & entertainment
✔ Office supplies & office equipment
✔ Professional fees (legal, accounting)
✔ Insurance
✔ Rent & workspace
✔ Utilities & telecom
✔ Motor vehicle/travel
✔ Home office expenses
✔ Licences, fees, dues
✔ Freight, delivery, shipping
✔ Repairs & maintenance
✔ Interest & bank charges
✔ Salaries/subcontractors
✔ Bad debts
✔ Capital assets (for CCA)
GST questions
✔ Were GST/HST paid?
✔ Do you have invoices with GST shown?
✔ Do you have a GST/HST number?
✔ Do you want to claim ITCs?
If you’re earning T4A income consistently, registering for a GST/HST number isn’t just about compliance — it’s about accuracy and control. When you separate your GST/HST input tax credits from your business expenses, your bookkeeping becomes cleaner, your tax return becomes more precise, and you avoid mixing recoverable tax with actual operating costs. Instead of absorbing GST as an expense, you may be able to recover it, improving your cash flow and presenting a more professional, structured business profile. Over time, this separation can make a meaningful financial difference — especially as your income grows. If you’re serious about treating your T4A income like a real business, getting a GST/HST number and managing it properly could be a smart next step.