How to Claim Co-operative Education Tax Credits (CETC Credits)
By Hugh Faloon, CPA, CA, TEP, Partner
There are many benefits to hiring co-op students. By giving these individuals the opportunity to combine their formal education with practical experience, companies are often able to benefit from new ideas and perspectives. These students can contribute greatly to the success of your organization, and could potentially become full-time staff members after graduation. GGFL has been a long-time supporter of co-op programs, which have resulted in long, successful careers for students (some of which who are now Partners).
The other benefit of hiring co-op students is that there are tax credits available. In Ontario, this is known as the Co-operative Education Tax Credit (CETC) which provides Ontario businesses incentive to hire post-secondary students enrolled in a co-operative education program.
How does the tax credit work?
Employers with prior year payroll in excess of $600,000 are entitled to recoup 25 per cent of eligible expenditures per student per work term up to the maximum allowable $3,000 credit.
Small businesses are eligible to claim 30 per cent of expenditures per student per work term up to the maximum allowable $3,000 credit. A small business is defined as a business whose total payroll in the previous year did not exceed $400,000.
For businesses with a payroll between $400,000 and $600,000, there is a formula which gradually phases out the small business enhancement.
How to claim the credit
Corporations claim the tax credit on their T2 Corporation Income Tax Return. Unincorporated business owners can claim the tax credit on form ON479 included in their personal tax returns. Members of a partnership can claim their share of the tax credit on their own personal or corporate tax return.
The tax credit is available for the taxation year the work placement ends.
What qualifies as work placement?
For a work placement to qualify for the CETC, the following conditions must be met:
- The placement has been approved by an Ontario post-secondary educational institution;
- The student must be active in the workplace and be more than an observer;
- The work placement is at least 10 weeks if a co-op;
- The work is paid;
- The student is supervised and evaluated; and
- The educational institution monitors the student’s progress.
What is an eligible expenditure?
Only eligible expenditures can be claimed as part of the CETC. Eligible expenditures include salaries and wages paid over the course of the placement, or fees paid to an employment agency for the services of a student enrolled in an eligible work placement program.
How do you support your claim?
As the employer, you must have a certified document from the educational institution confirming you have provided a placement to a student for a qualifying co-op program. The document must contain the name of the student, the employer, the institution, the term of the work placement, and the name or discipline of the co-op program.