Ontario Co-operative Education Tax Credit: Wage Subsidies for Business

During the spring and summer months each year, businesses across Ontario aggressively pursue government funding programs to hire students and post-secondary graduates. Among their many options, which include wage subsidies such as government grants and tax credits, businesses can strategically reduce their labour costs while also developing youth talent.

The Ontario Co-operative Education Tax Credit (CETC) is one of these wage subsidies that are commonly accessed by businesses, however do not need to be approved via application like other well-known programs. Provided as a tax credit, businesses may claim up to 25-30% of a student’s wage to a maximum $3,000 per 10-week to 4-month co-op placement.

As opposed to other government wage subsidy programs, the Ontario CETC is an option that provides businesses with the ability to claim funding year-round. Although other hiring programs such as Canada Summer Jobs (CSJ) and sectorial hiring grants provide funding for a short period of time each year, businesses can create co-op positions and claim the Ontario Co-operative Education Tax Credit year-round.

Ontario Co-operative Education Tax Credit: Program Details

Ontario Government Funding Contribution

The Government of Ontario will support businesses that provide students with co-op positions by awarding tax credits valued up to $3,000 per student employed. The value of these credits are calculated as such:

• Small Businesses: Companies whose total payroll was less than $400,000 in the previous year may receive 30% of a student’s wages to a maximum $3,000.
• Mid-Sized and Large Businesses: Companies whose total payroll was greater than $600,000 in the previous year may receive 25% of a student’s wages to a maximum $3,000.

Eligibility Factors

Businesses interested in applying for the Ontario CETC must ensure that:

• They are operating legally within Ontario;
• Their co-op position is a paid position that provides relevant work experience for a student hire;
• Internships are no less than 10-weeks in duration and last less than 4-months. (Employers wishing to hire a co-op student for a longer period may hire them for multiple work terms.)

How to Apply for the Ontario Co-operative Education Tax Credit

Businesses who wish to use the Ontario CETC as part of a comprehensive government funding for hiring strategy should consider the following application information.

How Can I Claim the Ontario Co-operative Education Tax Credit?

Corporations: Claim the tax credit on Schedule T2SCH550 and file with your T2 Corporation Income Tax Return.

Unincorporated Businesses: Claim the tax credit on form ON479, otherwise known as “Ontario Credits”, and include in your personal income tax return.

If you are not sure what these forms are, simply forward this article to the person that prepares your taxes.

Supporting Documents Required to Claim the Ontario CETC

Remember to save the letter of certification that you receive from the student’s university or college. If possible, make sure that the letter includes the following information:

• The student’s name;
• The student’s educational institution;
• The employer’s name (your business);
• The term of the work placement; and
• The name/discipline of the qualifying co-operative education program.

Companies are advised to hold onto this letter for a minimum of seven years as you may be asked to present it. This is a standard procedure to validate your co-op placement. Failure to provide supporting documentation upon the request of the government may risk forfeiting your tax credit.

Access Canadian Government Grants to Hire Recent Graduates

Although tax credits can be an excellent way to reduce labour costs, they are not always the best strategic fit when developing young talent. Many businesses often seek higher-valued government grants to subsidize the cost of hiring youth. This strategy often involves hiring a recently graduated candidate for a period of 4-months or longer. As opposed to co-op education tax credits, these programs seek to provide recent graduates with permanent positions where they can begin their careers.

During the spring and summer months each year, hiring grants become available and enable businesses to receive up to 50% of a recent graduate’s wages to a maximum of $20,000 for the first year of employment. These Canadian government funding programs are segmented by industry (such as agriculture or technology), and businesses must act quickly upon their release because their funds are quickly depleted.

The easiest way to discover your potential for receiving government grants to hire recent graduates is by using Mentor Works’ free Wage Subsidy Identifier tool. By telling us more about your business and the position you’re hiring for, we can match you to the most suitable wage subsidy and assist with the application process.