Hello Rashmi
Thanks for your question.
Just to clarify, who owns the units in XYZ Unit Trust?
At first glace, this transaction could be problematic form the perspective of section 109 of the SIS Act, which broadly requires that a trustee of a super fund transacts on an arm’s length basis in relation to its investments.
If the SMSF received no consideration for the units in the ABC Trust – no cash and no other assets – then this would strike me as concerning.
If the SMSF received units in XYZ Trust in exchange for units in ABC Trust, then the issue becomes whether the units received are equal in market value to the units disposed of.
From an audit perspective, information about the basis on which the units in ABC Trust were valued at the time of the transaction is required.  If units in XYZ Trust were provided in exchange for units in ABC Trust, then information about the market valuation of these units should also be provided.
Although not the subject of your question, whatever the actual consideration (if any) received by the SMSF for the disposal of units in ABC Trust, it will be treated as if it has received market value consideration from a CGT perspective.
Best regards
The Auditors Institute