Tax is calculated on a first in last out basis. i.e if you buy...

Tax is calculated on a first in last out basis.

i.e if you buy two shares on Tuesday, 5 on Wednesday and 6 on Friday and decide to sell 10 on monday your cost base will be the price of Friday's purchases and the last 4 bought on Wednesday. The remaining one bought on Wednesday and the two bought on Tuesday won't be taxed until sold. This stops people cheating the CGT discount. In a first in first out scenario you could be a day trader with a large holding parcel who could say that each of their trading parcels was in fact one from their holding parcel and apply the CGT discount. Obviously they are buying and selling new shares and should not be allowed this discount.

Algo trading is exactly the same. Whatever you sell in a tiny parcel, even one share, will either be a capital gain or loss. This sale will use the cost base of the most recently purchased bundled of shares who's amount (in shares) matches the amount you have sold. You will record each individual capital gain or loss together at the end of the year and record the net capital gain or loss on your tax return.

Essentially in a perfect world there will be hundreds of individual CGT events that will result in a net CGT gain or loss for the churned shares.

In the real world a lot of people try and cheat the system. That is why there are data matching programs and audits with hefty penalties.

Hope that helps.