What is Bill 145?
On March 4, 2020, Bill 145 received royal assent.
Bill 145, Trust in Real Estate Services Act, 2020 made various amendments to the Real Estate and Business Brokers Act, 2002. The 2002 Act is now named Trust in Real Estate Services Act, 2019 and currently prohibits trading in real estate without registering.
Whether you are new to real estate or have been in business for years, it is important to know how these changes could affect your business.
What is a Personal Real Estate Corporation (PREC)?
Personal Real Estate Corporations enable real estate agents in Ontario to incorporate their businesses. Doing so will enable realtors to operate in a more regulated environment like dentists, doctors, and lawyers whilst having access to the business advantages of being incorporated in Ontario. As a result, realtors can now take advantage of the flexibility in income and tax planning, expand their service offerings, avail more government grants, be in a position to invest in new technologies and services which ultimately increase employment.
Top 5 things you need to know about Bill 145:
- Incorporating your Real Estate Business
The Bill allows for real estate brokers and agents to set up personal real estate corporations (PERC) for their business. One of the biggest benefits of incorporating your real estate business is the tax savings. When you make the leap and switch to a personal real estate corporation (PERC) in Ontario, you pay fewer taxes and retain more of your income. Income that can be used to fast-track you to earlier retirement.
- Focus on Continuous Learning and Growth
The world is continuously evolving and it is vital for every business to stay up-to-date with changes and new information. Under the new rules, registered estate agents cannot call themselves ‘specialists’ until they have met specific criteria and completed the required learning programs. Continuous learning can significantly improve the day-to-day running of your business, leading to increased productivity and growth.
- Improved Professional Standards
Real estate brokers are held to higher professional standards than they were before. Updates have been made to the Code of Ethics for the Real and Brokers Business Act, 2002. Bill 145 creates regulatory changes that are designed to update and modernize the Real Estate and Brokers Business Act, 2002 (REBBA)’s Code of Ethics, improving professionalism across the real estate industry in Ontario.
- Improved Customer Protection
Higher professional standards mean improved consumer protections. Under Bill 145, consumers are protected further by the regulator’s ability to impose fines when brokers do not comply with the new rules. Registered agents can be fined $50,000 and brokerages can be fined $100,000 for infringement of the act.
- Fairer Taxes
Personal Real Estate Corporations (PERC) in Ontario will allow Realtors to potentially claim more in deductible expenses and pay a lower tax rate. Whether it is claiming the costs of incorporating your business, real estate courses, professional fees and/or vehicle expenses, the right accountant will advise you on how to save even more money. By keeping earnings within the corporation realtors can take advantage of deferring personal taxes on profits earned. The funds saved could be used for investment purposes within the corporation.
SRJ Chartered Professional Accountants are real estate tax accountants in Mississauga who have specialized in incorporating personal real estate corporations (PERC’s), preparing and filing your taxes, ensuring required forms are filled and all entitled tax deductions have been explained.
How Bill 145 can benefit your Ontario real estate business
Before Bill 145 was introduced, realtors were paying personal tax rates as high as 53.5% on their real estate income.
With the real estate bill coming into effect, realtors have the opportunity to get their real estate business incorporated, thus, reducing the tax rate they pay at the end of each tax year. Incorporating your real estate business is highly beneficial and should be done as soon as possible, so you can start taking advantage of the new changes.
While there are initial costs of setting up a Personal Real Estate Corporation in Ontario (PERC’s), these costs are deductible and incorporating your business can lead to long-term savings.
How Bill 145 benefits consumers
Bill 145 improves professional standards and compliance within the real estate sector. Realtors are required to adhere to higher ethical standards, and it is mandatory to follow the new and revised rules.
Under the new bill, registered real estate brokers and salespeople are required to meet educational requirements and are encouraged to complete specialist certification. This new standard brings a new wave of professionalism to the trade.
Consumers are helped further by the optional transparency the bill provides. Sometimes, sellers can receive more than one offer on a property and bidding wars can get competitive. Sellers can now reveal the bids they have received on a property, making it easier for buyers to submit a tactical counter bid.
SRJ Chartered Professional Accountants are chartered professional accountants in Toronto and Mississauga providing you with a variety of services including consultation and assistance with incorporating your business. For more information contact us at 647-725-2537 or send an email to firstname.lastname@example.org.