A decade of hard work pays off with new PREC Regulation
TORONTO, ON –After more than ten years advocating for the right to incorporate, the Ontario Real Estate Association (OREA) is proud to announce that as of today, Ontario REALTORS® will be permitted to operate their business through a personal real estate corporation (PREC). For Realtors who will benefit from a PREC, it can significantly lower their tax burden – helping them reinvest in their business and save for the future.
“Today is a historic day for Ontario’s 80,000 Realtors. We are thrilled that our members can now benefit from the same modern business tools as other professions and Realtors in other provinces,” said OREA President Sean Morrison. “With this new regulation, Realtors will be able to improve their customer services and hire more people. Furthermore, PRECs are going to offer Realtors substantial tax savings and help them plan their tax payments with the ups and downs of the real estate market.”
The new regulation permitting PRECs is part of the Trust in Real Estate Services Act, 2020 (TRESA), which replaces the Real Estate & Business Brokers Act, 2002 (REBBA). TRESA passed Third Reading in the Ontario legislature on February 27, 2020 with unanimous consent.
OREA has worked closely with Ministry officials to create a PREC model that is beneficial to Realtors and their clients, with a high level of consumer protection. Under this new regulation, PRECs must be solely owned by a real estate registrant, and real estate salespeople and brokers will be able to form and use PRECs to receive and accumulate the fruits of their labour.
OREA estimates that PRECs in Ontario will create 300 jobs in the province and save Ontario Realtors $14 million annually in deferred taxes – money that agents can use to reinvest in their business to hire more employees, offer better services to clients and grow their operation.
The PREC model for Realtors is flexible and Realtors who use a PREC may be able to:
- Achieve tax deferrals
- Benefit from the Lifetime Capital Gains Exemption for shares of a qualified small business corporation
- Income split
- Utilize holding corporations to own and manage their other investment and business activities along with their core real estate trading activities
- Retain real estate related income in the PREC to generate investment income or to be reinvested in active business activities
“OREA has achieved a gold standard when it comes to incorporation models for our Members, and we should be proud of that great work our team and the Ontario Government has done to maximize the advantages of incorporating. This is a huge advocacy win for OREA and it underscores the importance of having a strong Realtor voice at Queen’s Park.” said OREA CEO Tim Hudak. “OREA would like to thank the Ford Government and Minister Lisa Thompson for ensuring Realtors can benefit from better management of their income and taxes while better serving their clients.”
While this change is historic, there are advantages and disadvantages to the creation and use of a PREC based on each Realtors personal circumstances. OREA urges all Members to seek out independent accounting and tax advice when deciding whether or not to incorporate. To help Realtors get up to speed on the new changes, OREA is hosting a members-only webinar on October 8th at 10:00am.
Members can register at www.orea.com/PRECSwebinar