The government of Ontario encourages businesses to provide students and young workers with on-the-job experience through the Co-operative Education Tax Credit. This credit provides an incentive for accountants and accounting firms that want to attract fresh talent while potentially reducing their overall annual tax payment.
Integrating new workers with recent educational credentials into your accounting practice benefits not only students but your firm as well. The Co-operative Education Tax Credit provides corporations, unincorporated individuals, and small businesses with the means to network with an emerging workforce and help impart valuable knowledge about the accounting field. If you’re an accountant based in Ontario, consider connecting your business with an eligible postsecondary institute to take advantage of the credit.
What Is the Credit?
The Co-operative Education Tax Credit is designed to partially reimburse expenses related to an eligible work placement program or temporary internship. It can be applied in full to each work placement your business offers, meaning if you hire more than one student during the same period, you can claim the full eligible amount for each student. Small businesses can claim a monetary amount equal to the lesser of either:
- 30 percent of eligible expenses for the work placement (wages, recruitment expenses, supplies, etc.)
The claim is fully deductible so the amount you claim may exceed your overall taxes owed and result in a refund.
A small business is defined as a corporation or an unincorporated business that claimed a total payroll amount of $400,000 or less during the previous fiscal year. If your accounting firm claimed $600,000 or more for payroll in the last fiscal year, you are no longer considered a small business. You can still claim the credit, but at a reduced rate of 25 percent of eligible expenses, rather than 30 percent.
Who Is Eligible?
Any corporation, small business, or unincorporated small business in Ontario that hires students through a co-operative work placement program is eligible to apply for the credit. A work placement or co-op internship program must take place in conjunction with students’ schooling. The student should be currently enrolled in a relevant postsecondary program while working for you, and be eligible to earn university credit for the work completed. The duration of the work placement should be less than 75 percent of the total duration of the student’s university program.
To get the most benefit out of the process, make sure you take the time to design a quality accounting internship that provides practical, useful training for students. A work placement program should last between 10 weeks and four months.
Eligible postsecondary institutes include any universities or colleges of applied arts and technology in Ontario that use enrollment-driven models for calculating annual entitlement to government grant funding. You can confirm this by contacting a school representative. The school should offer a program relevant to the field of the work placement; for an accounting internship, select a university or college that offers programs in accounting, economics, finance, or another related field.
How Do You Claim the Credit?
To claim the credit, unincorporated businesses must fill out Form ON479, and corporations should fill out Schedule 550. You also need to get a letter of certification from the university to confirm that a student was employed in a co-op placement at your firm. This letter should include the student’s name, your name or the name of your firm, and detailed information about the placement.
Hiring interns or providing work placement for students is a great way to introduce new ideas and innovation to your accounting practice. While you impart tried-and-true skills and knowledge to the student, the student can also introduce you to updated academic concepts that are relevant to your work. A good co-op work placement should be a learning experience not only for the intern, but for you and your accounting practice.