Co-operative Education Tax Credit (CETC)
The Co-operative education tax credit helps encourage Ontario businesses to provide experiential learning opportunities and hands-on job experience to post-secondary students through co-op work placements. The 25-30% refundable tax credit is available to Ontario businesses that hire students enrolled in a post-secondary co-operative education program.
Offered by Ministry of Finance
Amount
25-30% refundable tax credit on eligible expenditures for each qualifying work placement (30% for employers with total payroll in the previous taxation year of $400,000 or less, 25% for $600,000 or more), to a maximum of $3,000 per work placement
Quick eligibility check
Who can apply
Eligible employer
Eligible employers include all corporations or unincorporated businesses with permanent establishments in Ontario subject to Ontario corporate income tax or Ontario personal income tax.
Members of a partnership (other than a limited partner) may share the credit for each qualifying work placement.
If an eligible student has consecutive work placements with two or more associated corporations, the associated corporations will be considered to be one employer for the purposes of claiming this credit. The associated corporations must designate which corporation will claim the qualifying work placements.
Qualifying work placement
To qualify, a work placement must be for a student who is enrolled at an eligible educational institution performing employment duties for an eligible employer under a qualifying co‑operative education program offered by the institution.
A qualifying work placement must meet all of the following conditions:
- the work placement is developed or approved by the eligible educational institution,
- the student is engaged in productive work during the work placement and is not just an observer,
- the work placement is either:
- at least 10 consecutive weeks for qualifying co‑operative education programs other than an internship program, or
- not less than eight consecutive months but no more than sixteen consecutive months for a qualifying internship program,
- the student is paid for the work performed during the work placement,
- the employer supervises and evaluates the student's job performance during the work placement, and
- the educational institution monitors the student's progress in the work placement.
Qualifying co‑operative education program
A qualifying co-operative education program is an educational program or course of study that formally integrates students' academic studies with work placements and meets the requirements below. These requirements generally parallel the requirements established by the Co-operative Education and Work‑Integrated Learning Canada (CEWIL Canada) for cooperative education programs.
- For a co-operative education program other than an internship program:
- each work placement must be at least 10 consecutive weeks,
- the total time spent in mandatory work placement(s) must be at least 30% but not more than 75% of the total time spent in required academic study, and
- at least half of the work placement(s) must be mandatory.
- For a co-operative education program that is an internship program:
- there must be an optional work placement of at least eight but not more than 16 consecutive months, and
- the total time spent in the work placement must be at least 30% but not more than 75% of the time spent in required academic study.
- All optional work placements must be completed before the start of the final academic term and must be recorded in the student's transcripts.
- The co-operative educational program provides credit towards a post‑secondary degree, diploma or certificate granted by an eligible educational institution.
An eligible educational institution must keep proper documentation to prove that the programs meet the above requirements.
Eligible educational institution
The following are eligible education institutions for purposes of a qualifying co‑operative education program:
- A university or college of applied arts and technology in Ontario whose enrolment is counted for the purposes of calculating annual operating grants entitlements from the Government of Ontario
- The Michener Institute of Applied Health Sciences
- The Ontario College of Art and Design
- Redeemer University College
Ontario businesses that hire students enrolled in a post-secondary co-operative education program are eligible for the tax credit.
About the funding
The 25-30% refundable tax credit is available to Ontario businesses that hire students enrolled in a post-secondary co-operative education program. The maximum credit for each work placement is $3,000.
An eligible employer can claim a credit for each qualifying work placement ending in the taxation year.
The tax credit rate is:
- 30% for employers with total payroll in the previous taxation year of $400,000 or less,
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- 25% for employers with total payroll in the previous taxation year of $600,000 or more, and
- A rate between 30% and 25% (calculated by a formula) for employers with total payroll in the previous taxation year between $400,000 and $600,000.
The table below shows how to calculate the credit depending on the total payroll of the eligible employer in the previous taxation year.
Total payroll in the previous taxation year | Credit calculation
$400,000 or less
The credit is the lesser of:
30% of the eligible expenditures incurred by the employer in respect of the qualifying work placement, and
$3,000 (the maximum amount of the credit per work placement)
Example:
Employer's total salaries in previous taxation year were $300,000
Student work placement began on September 1 and ended on November 24 (12 weeks)
Student's wages were $950 per week
The credit is the lesser of:
$3,420 = (30% x $950 × 12) = (30% x $11,400), and
$3,000
$600,000 or more
The credit is the lesser of:
25% of the eligible expenditures incurred by the employer in respect of the qualifying work placement, and
$3,000 (the maximum amount of the credit per work placement)
Example:
Employer's total salaries in previous taxation year were $700,000
Student work placement began on September 1 and ended on November 24 (12 weeks)
Student's wages were $950 per week
The credit is the lesser of:
$2,850 = (25% x $950 × 12) = (25% x $11,400), and
$3,000
Greater than $400,000 but less than $600,000
The credit is the lesser of:
(25% × A) + [(5% × A) × (1 − B/$200,000)], and
$3,000 (the maximum amount of the credit per work placement)
A is the sum of all eligible expenditures incurred by the employer in respect of the qualifying work placement
B is the total amount of salaries or wages paid by the employer in the previous year that exceed $400,000.
Example:
Employer's total salaries in previous taxation year were $500,000
Student work placement began on September 1 and ended on November 24 (12 weeks)
Student's wages were $950 per week
A is equal to $950 x 12 = $11,400
B is equal to $500,000 - $400,000 = $100,000
The credit is the lesser of:
$3,135 = (25% x $11,400) + [(5% x $11,400) x (1 - $100,000/$200,000)], and
$3,000
Student employed for more than four months
Most work placements are for a minimum employment period of 10 weeks up to a maximum of four months. However, some educational programs (for example, qualifying internships) require employment periods that exceed four months. If this occurs, any additional consecutive four‑month period for that student will be considered a separate work placement.
If the additional period is less than four consecutive months but is more than 10 consecutive weeks, that period will still be considered a separate work placement.
However, if the additional period is less than 10 consecutive weeks, then it will be considered part of the work placement for the last completed four‑month period.
For example, assume one student works 11 months and another student works nine months. The first student has three qualifying co‑op work placements - two of four months each and one of three months. The second student will have two qualifying co-op work placements - one of four months and one of five months.
The credit will reduce tax payable for that year and any excess will be refunded.
The full amount of the credit is taxable and must be reported as income in the tax year in which the credit is received.
The following expenditures made by a business in respect of a qualifying work placement are eligible, provided the amount of the expenditure is reasonable:
- Salaries and wages including taxable benefits (the amounts reported on the T‑4 slip) paid or payable to the student for the work placement. The student's salary must be attributable to an Ontario permanent establishment (place of business).
- Fees paid or payable to an employment agency for the work placement for services of a student carried out primarily at an Ontario place of business.
Government assistance received by the business for the work placement will reduce the amount of the expenditure eligible for the credit. Government assistance means assistance in any form from any level of government including municipalities or other public authorities.
A repayment of government assistance received for a work placement will also qualify as an eligible expenditure for the credit, but only to the extent that the government assistance affected a claim in a previous taxation year.
Claimed through the Canada Revenue Agency on your corporate tax return.
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