Ann: Galaxy signs long term Offtake Agreements for Mt Cattlin, page-231

Thanks Flashfish.
I think in the end we are talking about two different things, but both warrant further discussion.

Example 1)
In your example above,
Monday: Buy 5 units. Stick 3 in the drawer ('identify as LT holdings').
Thurs / Fri: Sell 2, later buy 2; Sell 2, later buy 2, Rinse, Repeat. Profits at full marginal rate.
1 year later: Sell 3 units with full CGT discount. Sell 2 units at full marginal rate.

In this example you haven't actually SHORTED anything in the true sense of the word.
You've just sold and later bought again a stock that you already owned, but believed would drop in value.
In addition (and this is where we need more advice from the tax accountants), you need to be careful that the ATO doesn't consider that you are 'carrying on a business of share-trading' based on factors such as regularity, volume and intent of (the majority) of your purchases. See https://www.ato.gov.au/General/Capital-gains-tax/Shares,-units-and-similar-investments/Shareholding-as-investor-or-share-trading-as-business-/
I think ATO COULD tax the whole lot at marginal rates, so be careful, and quiz that accountant(s)!
I know of some (e.g. @vmp) who hold two trading accounts to keep their LT holding at arms-length from their trading parcel. In my mind I would think that your action of 'identifying a parcel as LT' should be sufficient for the same purpose, but I am very interested in someone with REAL experience / training in this regard to comment.


Example 2)
My original question is whether it is possible to borrow stock from yourself (just like someone else can borrow from you for the purpose of short selling) without triggering a CGT event on the original holding? The true definition of shorting, in my understanding, requires the borrowing of stock that you don't actually yet own for the purpose of selling and later buying back.

Monday: Buy 5 units. Stick 5 in the drawer ('identify as LT holdings').
Thurs / Fri : Borrow and sell 2, later buy 2 and return original to holder (yourself). Repeat. Profits at full marginal rate.
1 year later: Sell all 5 units with full CGT discount.

If sell/buy is finished on the same day, then there is no obvious disconnect in the original LT holder (which IS held for everyday of the calendar year). Only an investigation of the time-stamps shows a short duration of non-holding.
If sell/buy is over multiple days then this becomes more problematic.
Ultimately it comes down to whether the ATO would accept this intent.

Discussion:
The treatment of Securities Lending arrangements are mainly covered by S26BC of the Income Tax Assessment Act 1936 (pages xix, xx) and discussed in this old thread: put simply:
The sale by the Lender to the Borrower at the beginning of the transaction and the reverse sale by the Borrower to the Lender at the end of the transaction are not regarded as disposals for the purposes of Capital Gains Tax.
and
The transaction must be reversed within 12 months. If the transaction is not reversed within 12 months, the transaction is regarded as a disposal (sale) by the Lender to the Borrower at the date of the loan, and the exemptions from taxation are not realised.
and (among other things):
The the borrower and lender deal at arm’s length in relation to the transaction; (perhaps this is not possible as a single entity)


Finally, note that the ATO talk openly about selling by FirstInFirstOut (FIFO) method _OR_ by specifically identifying shares to be sold. e.g. https://www.ato.gov.au/General/Capi...dentifying-when-shares-or-units-are-acquired/
If your accountant is charging you extra for this advice, then I'd consider shopping around.