By Lewis Jackson and Scott Murdoch

SYDNEY PricewaterhouseCoopers Australia is looking to sell its government, education and healthcare practice to private equity firm Allegro Funds, according to a person familiar with the matter, as the firm battles a scandal over its misuse of confidential government tax plans.

A term sheet for a potential deal has been drawn up, the Australian Financial Review said when it first reported the story on Friday.

The sale could include roughly 100 partners and 1,000 staff, or 10% of the "big four" professional services firm, the AFR added.

A spokesperson said PwC does not comment on market speculation when asked about the story. Allegro Funds did not immediately respond to a request for comment. The person familiar with the sale plan could not be named as the information had not yet been made public.

Allegro Funds describes itself as a restructuring specialist with over A$4 billion ($2.68 billion) under management.

Acting PwC Australia chief executive Kristin Stubbins said last month the firm would "ringfence" its government consulting business and appoint a separate board to consider "strategic options for the business".

The firm is reeling after Australian tax authorities found a former PwC partner who was advising the federal government on laws to prevent corporate tax avoidance shared confidential information with colleagues which was then used to pitch to multinational companies for work.

Several major pension funds have frozen work with the firm and Australia's most populous state last week banned it from new tax work for three months.

($1 = 1.4930 Australian dollars)

(Reporting by Lewis Jackson; Editing by Lincoln Feast)