Income Tax Act 2007 section 289

The proportion of eligible shares requirement

Section 289 sets out the requirement that a minimum proportion of an investing company's holding in a relevant company must consist of eligible shares, and establishes valuation rules to determine whether that threshold is met.

• Eligible shares must represent at least 10% by value of all shares and securities in the relevant company held by the investing company
• Shares and securities are valued at the time of the most recent "relevant event" — typically when they were acquired or when a value-enhancing payment was made — rather than at current market value
• If the current value of shares or securities falls below what the investing company originally paid for them, the value is deemed to equal the original cost
• "Eligible shares" carries the same meaning as defined in Chapter 3 of the Act (section 285(3A) and (3B))