Improving the integrity of
Prescribed Private Funds (PPFs)

Discussion Paper

The Treasury
November 2008

 Commonwealth of Australia 2008
ISBN 978-0-642-74488-3

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Consultation process
Making Comments
The Government is seeking submissions and comments on this paper by 14 January 2009.
Comments can be forwarded to the following address:
Manager
Philanthropy And Exemptions Unit
Personal And Retirement Income Division
The Treasury
Langton Crescent
PARKES  ACT  2600

Or emailed to: ppfreview2008@treasury.gov.au
For inquiries, please call Chris Leggett 02 6263 3208
Confidentiality
All submissions received will be treated as public documents unless the author of the submission clearly indicates the contrary by marking all or part of the submission as ‘confidential’ prior to the submission being lodged. Public submissions may be published in full on the Treasury website, including any personal information of authors and/or other third parties contained in the submission. If your submission contains the personal information of any third party individuals, please indicate on the cover of your submission if they have not consented to the publication of their information.
A request made under the Freedom of Information Act 1982 for access to a submission marked confidential will be determined in accordance with that Act.	

Contents
Improving the integrity of Prescribed Private Funds (PPFs)
Introduction
PPFs in context
Areas for improvement in the current arrangements for PPFs
Principles underpinning the rules governing PPFs
Proposed amendments relating to the Principles
Appendix A — Guidelines for Prescribed Private Funds (PPFs) (including a model Trust Deed)
Appendix B — Current accumulation and distribution rules
Appendix C — Fit and proper person tests applying to Registrable Superannuation Entity (RSE) licencees and tax agents

Improving the integrity of Prescribed Private Funds (PPFs)
Introduction
1.	The Treasurer announced in the 2008 Budget that the Government will legislate guidelines to improve the integrity of Prescribed Private Funds (PPFs) and to provide the trustees of PPFs with greater certainty as to their philanthropic obligations. This commitment is to be achieved by amending and legislating the PPF guidelines to, among other things, ensure regular valuation of assets at market rates and increase the size of compulsory distributions. The Commissioner of Taxation will also be given greater regulatory powers.
2.	This Discussion Paper outlines these changes, and provides a point of reference for public submissions on this measure. This measure will have effect from 1 July 2009. A link to the current PPF Guidelines, and Model Trust Deed is at Appendix A.
3.	The Government intends that the new PPF Guidelines will be drafted using a principles based approach. The principles are outlined later in this discussion paper, and are the Government’s views on the essential characteristics of a PPF.
4.	It remains a fundamental concept that a PPF is a trust to which businesses, families and individuals can make tax deductible donations, for the purpose of disbursing funds to a range of deductible gift recipients and a PPF cannot distribute to another PPF or to a public ancillary fund.
PPFs in context
5.	PPFs came about as a response to a report on philanthropy in Australia by the Business and Community Partnerships Working Group on Taxation Reform dated 26 March 1999. PPFs are a form of ancillary trust fund designed to encourage private philanthropy by providing private groups, such as businesses, families and individuals, with greater flexibility to start their own trust funds for philanthropic purposes. Donations to PPFs are tax deductible. PPFs are limited to making distributions to other deductible gift recipients (DGRs) that either have been endorsed by the Australian Taxation Office (ATO), or are listed by name in the income tax law as a DGR. A PPF may be entitled to an income tax exemption if it is also endorsed as a charity, or endorsed as an ‘income tax exempt fund’.
6.	A PPF is one of two types of ancillary trust fund that can qualify for DGR status, and income tax exempt status. The other type is a public ancillary fund (PAF), which is distinct from a PPF in that it must establish a public fund.  Public ancillary funds are a common structure for community and fundraising foundations. Both types of ancillary fund act only as intermediaries between donors and organisations that can receive tax deductible donations.
7.	With the exception that they need not seek and receive contributions from the public, and control requirements, PPFs have the same characteristics as PAFs and accordingly must comply with all the other requirements of a public fund.
8.	The current PPF Guidelines outline the process to be followed, and requirements to be met, in order to establish a PPF, including the requirement to establish a trust in accordance with a model trust deed. The current Guidelines are unlegislated and therefore have no legal status in their own right.
Areas for improvement in the current arrangements for PPFs
9.	The current PPF Guidelines outline the requirements for PPFs in some detail, but not necessarily the objectives of those requirements. Furthermore, in cases of PPFs misusing their funds (for example, providing benefits to the donor) there is currently an ‘all or nothing’ penalty system. The ATO is generally limited to advising the Treasurer to declare that a particular organisation is no longer a PPF. De‑listing of a PPF does not affect the deductions that have already been claimed, nor enable the protection of the PPF’s philanthropic funds in the future.
10.	This Budget measure to improve PPF integrity will be achieved by:
•	amending the PPF Guidelines to, among other things, ensure regular valuation of assets at market rates and increase the size of compulsory distributions;
•	legislating the PPF Guidelines; and
•	giving the ATO greater regulatory powers.
11.	At present, the Treasurer is responsible for prescribing funds as PPFs. To further improve the integrity of PPFs, the Government proposes to bring the full administration of the PPF regime under the authority of the Commissioner of Taxation. This means that PPFs would no longer be ‘prescribed’ in the relevant legal sense but instead be endorsed by the Commissioner. Conceptually, PPFs are a private version of a PAF, and the ATO already has systems and processes by which PAFs are endorsed, reviewed and administered and these processes can be extended to the administration of PPFs. The Commissioner of Taxation would be made responsible for endorsing and dis‑endorsing PPFs, instead of the Treasurer being required to prescribe such funds as PPFs. This would have the effect of giving the ATO full regulatory control over PPFs and allow the ATO to take more timely action to protect the capital of a PPF. ATO endorsement of PPFs would be reviewable by the Administrative Appeals Tribunal, consistent with other endorsement rules.
12.	As such, Prescribed Private Funds may need to be renamed as ‘Private Ancillary Funds’. However, for the remainder of this discussion paper we will continue to use the term PPF.
Principles underpinning the rules governing PPFs
13.	The Government intends that the PPF Guidelines be amended to articulate the principles which will apply to PPFs. This should assist both the trustees and the ATO in understanding the requirements for PPFs. The four principles below outline the Government’s views on what the essential characteristics of a PPF should be:
Principles	
1.	PPFs are philanthropic	PPFs are vehicles for acts of philanthropy by donors, and benefit from significant tax concessions on that basis. The distributions of PPFs should therefore be of a quantity and regularity such that the PPF can be characterised as philanthropic. Donors to PPFs, and their associates, should not benefit from their PPFs.
PPFs should provide a benefit to the charitable sector that is much more than if the Government had taken the revenue forgone (by way of PPF tax concessions) and given it directly to that sector.	
2.	PPFs are trusts that: (1) abide by all relevant laws and obligations, and (2) are open, transparent and accountable	PPFs provide money and other assets (that have been donated to the trust fund) to non‑ancillary DGRs, and PPF trustees are bound by state trust laws.
In setting out to achieve philanthropic goals, PPFs must abide by all relevant laws. The Commissioner will take appropriate action against the trustees of PPFs that do not abide by the rules.	
3.	PPFs are private	PPFs have been established as a vehicle to encourage private philanthropy. This is in contrast to PAFs, which collect donations from the public. This characteristic necessarily limits who can donate to a PPF.	
4.	PPFs are ancillary funds	The purpose of a PPF is to assist in the management of money as it is transferred from the donor to non‑ancillary DGRs. PPFs are unsuitable for undertaking charitable work in their own right as this would make them ‘institutions’ which are subject to a different regulatory environment.	

Proposed amendments relating to the Principles
14.	The Government will amend and legislate the PPF Guidelines. The following section is a more detailed outline of the Government’s proposed amendments to the current Guidelines.
Principle 1 — PPFs are philanthropic
15.	The changes proposed under this principle relate to:  required distributions; regular valuation of assets at market rates; minimum PPF size; and increased public accountability.
1a	Required distributions
16.	PPFs should be philanthropic. Transfers by PPFs should therefore be of a regularity and quantity such that the fund is characterised as philanthropic. PPFs should neither be prolonged accumulators of funds, nor sparse distributors of funds.
17.	The Government’s Budget commitment to increase the size of compulsory distributions by PPFs will be achieved by clarifying the minimum standard of philanthropic behaviour among PPFs. In doing this the Government will give certainty to PPF trustees as to their philanthropic obligations, and also to members of the wider community that PPFs are distributing adequate amounts for them to be characterised as philanthropic.
18.	Improvements that could be made to the accumulation and distribution rules governing PPFs in the current Guidelines should be considered ahead of the importance of certain variables in determining the minimum distribution rate (see a summary of the rules at Appendix B). The distribution behaviour of PPFs is currently structured according to an accumulation plan, which determines the limits of a PPF’s accumulation phase before it moves into its distribution phase. However, the Government is aware that the use of individual accumulation plans makes for a complex system, resulting in PPFs being treated unequally depending upon their designated capital accumulation target.
19.	To simplify the current system, the Government proposes to replace accumulation plans with a system that would simply require PPFs to distribute a minimum amount in a given year which is calculated based upon the value of the PPF’s net assets at the close of the previous financial year. PPFs would value their assets annually at 30 June, and this ‘closing value’ would be used to calculate a minimum amount that must be completely distributed over the following 12 months (to the end of the following financial year). The calculated closing value would include all realised and unrealised capital gains. It is expected that these simpler arrangements would reduce the costs of PPF compliance and administration (as there would no longer be a need for individual accumulation plans) and improve certainty for PPF trustees.
20.	Under these new arrangements, a distribution rate needs to be set that is of an adequate amount such that a PPF can be characterised as philanthropic. The Government intends to consider the following in determining the rate:
•	Based on the available data, the ATO has estimated that the long‑term proportion of PPF distributions as a percentage of the closing value of the fund is approximately 15 per cent.
•	PPFs should benefit the charitable sector more than if the Government had taken the revenue forgone (by way of PPF tax concessions) and given it directly to the sector.
–	The majority of donors to PPFs are private individuals on the highest marginal tax rate (45 per cent). As the Government effectively provides a subsidy of 45 cents for each dollar donated to a PPF, the Government expects that this revenue forgone will be directed to the charitable sector in a relatively short period of time.
•	Comparable charitable vehicles, such as PAFs, are usually expected to distribute all of their income and gifts in the year that they are received. In some circumstances PAFs have been allowed to accumulate up to 20 per cent of gifts received for a limited period of time.
•	Imposing a distribution rate means that PPFs not continuing to receive donations are eventually wound down. This will prevent the erosion of the fund through negative investments, fees and the like. 
•	To maintain philanthropy during all market conditions, and to reduce complexity of administration, the Government considers that the Commissioner should not be given the authority to modify the minimum distribution amount according to market conditions (for example, share market performance).
Consultation questions
•	What is an appropriate minimum distribution rate?  Why?
•	Should the Commissioner have the ability to modify the minimum amount according to market conditions (for example, based on average fund earnings)?
•	Should a lower distribution rate apply for a period (for example, 1‑2 years) to allow newly established PPFs to build their corpus?	

1b	Regular valuation of assets at market rates
21.	PPFs are not bound by the current Guidelines to value their assets. The failure of PPFs to value assets leads to reduced distributions as some PPFs do not determine the value of unrealised capital gains, which the Guidelines say must be distributed if they are in excess of the approved capital base over any two consecutive financial years. The Government’s Budget announcement included a commitment to ensure PPFs regularly value their assets at market rates. As discussed above, the Government proposes that PPFs value their assets annually on 30 June of each year, in order to calculate the rate of distribution.
Consultation question
•	Are there any issues that the Government needs to consider in implementing the requirement to ensure PPFs regularly value their assets at market rates?  	

1c	Minimum PPF size
22.	Noting that individuals can still make tax deductible donations directly to DGRs, the Government is considering whether a minimum PPF size (for example, $500,000) should be established to ensure that the values of smaller PPFs are not eroded by operating expenses. As PPFs must be philanthropic, it would be considered inappropriate for a large proportion of a PPF’s capital to be eroded through operating expenses.
Consultation questions
•	Is setting a minimum PPF size appropriate?  
•	What should the minimum PPF size be in dollar terms?  
•	Should a fund have to distribute all its capital when its total value falls below this minimum amount?	

1d	Increased public accountability
23.	As PPFs receive significant tax concessions akin to public funds, the public should be able to identify the PPFs and be satisfied that PPFs are operating in an acceptable and transparent manner. While the requirement to operate in an acceptable and transparent manner is addressed in other parts of this paper, the Government proposes that all PPFs will be required to have an ABN, and that all PPFs be recorded on the Australian Business Register along with an indication that they are a PPF. Existing Business Register privacy rules will continue to apply.  The Government is also considering whether the contact details of PPFs should be provided publicly.  This would allow charities seeking funding to make representations to PPFs.   
Consultation questions
•	Are there any relevant issues that need to be considered in improving and standardising the public accountability of PPFs?
•	Are there any concerns with the proposal to require that the contact details of PPFs be provided to the public?  What information should be provided publicly? 	

Principle 2 — PPFs are trusts that: (1) abide by all relevant laws and obligations, and (2) are open, transparent and accountable
24.	The changes proposed under this principle relate to:  giving the ATO greater regulatory powers; introducing a ‘fit and proper person test’ for trustees; and moving relevant provisions from the Model Trust Deed into the Guidelines.
2a	Give the ATO greater regulatory powers
25.	PPFs are regulated throughout their lifecycle at both the state and Commonwealth level.
•	An initial assessment occurs before a PPF is prescribed by the Government in the Income Tax Assessment Regulations 1997 (ITAR 1997).
•	PPFs must also to comply with state trust law and other important rules and legislation. 
•	In addition the ATO monitors PPFs on an ongoing basis to ensure they continue to meet the Guidelines. PPFs are required by the Guidelines to provide an annual return to the ATO, and this requirement is proposed to continue.
•	PPFs must also have their financial statements audited by a person registered under Part 9.2 of the Corporations Act 2001 (clause 11.3 of the Model Trust Deed), and these reports are submitted as part of the return.
26.	There are limited remedial responses available to the ATO if a trustee of a PPF fails to meet the ongoing requirements for the fund to be a PPF. Currently, a PPF found to be in breach of the Guidelines may be de‑listed as a DGR.  Current practice is for the ATO to draw the Treasurer’s attention to cases of flagrant or repeated breaches of the PPF Guidelines, as opposed to genuine mistakes or oversights. The ATO may also revoke a PPF’s endorsement as an income tax exempt charity if: (1) the ATO considers that the PPF is no longer charitable; or (2) the PPF has not provided information or a relevant document within a time specified by the ATO.  
27.	A number of PPFs have been found to have breached the Guidelines. These breaches include:  PPFs carrying on a business; PPFs making loans offshore and/or to associates of the founder or major donor (these loans are of particular concern when they are provided at a reduced or zero rate of interest or are not repaid); and PPF funds being used to purchase property for use by the founder or their associates (examples of property have included both residential and commercial real estate and motor vehicles).
28.	The ATO is limited in the actions it can take against trustees or funds breaching the Guidelines, their Trust Deed, or other relevant laws. The current ‘all or nothing’ approach means the ATO is unable to always apply appropriately scaled penalties that suit the nature of the breach of the Guidelines or Trust Deed. In some cases this may mean the ATO does not take action against a PPF because the remedy would be considered too harsh. Further, the ATO is unable to take any action against trustees who inappropriately manage PPFs. Importantly, in the case of trustees mismanaging a PPF’s funds, the ATO is unable to remedy the loss of funds.
29.	In its Budget announcement, the Government stated its intention to give the ATO greater regulatory power.  Such powers are necessary for the ATO given the significance of the tax concessions involved. There may be Constitutional limitations on giving the ATO power to further regulate PPFs. However, these limitations could be overcome by requiring PPFs to have a corporate trustee.
30.	It is considered that the extra costs incurred for shifting to a system requiring corporate trustees would be far outweighed by the ATO’s enhanced ability to take action against PPFs that mismanage their funds, thereby satisfying the public that the PPF concession does not pose a problem to the integrity of the tax system. Corporate trustees are relatively popular in the self‑managed superannuation fund sector, and the average assets of self managed super funds are lower than for PPFs.
31.	It is proposed that a number of transitional rules be used to bring existing PPFs under the new Guidelines; for example, providing a transitional period of two years whereby existing PPFs can use the current Guidelines until they are brought under the new Guidelines. 
32.	A sample of 129 existing PPFs revealed that 84 per cent already had corporate trustees.
Consultation questions
•	Will two years be a long enough transitional period for existing PPFs to comply fully with the new Guidelines?
•	Are there any cost or other concerns relating to the corporate trustee proposal?	

33.	As the responsibilities of PPFs are split between their tax obligations and their other trust obligations, the ATO may also be provided with powers (through new secrecy disclosure provisions and information gathering provisions) to make enquiries of relevant state or territory bodies and to disclose relevant information to state or territory attorneys‑general. For example, these powers may be necessary where the ATO is concerned that a trustee of a PPF has misused PPF funds, or may otherwise be in breach of the relevant state or territory legislation governing trusts.
Consultation question
•	Are there any privacy concerns that the Government needs to consider?	

34.	The Government intends to allow the ATO to respond proportionately to misuse of PPFs by providing it with access to a wider range of penalties. It is considered that scaled penalties that suit a breach will enable the ATO to appropriately address the behaviour of the relevant party. For example, in the case of inappropriate behaviour of trustees, the penalty could include either leaving the assets of the fund intact, or requiring restitution.
35.	The range of penalties could include:  enforceable undertakings; fines; restitution; removal/disqualification of the trustee; winding up; and criminal, civil or administrative penalties.
Consultation question
•	Are there any concerns over particular penalty types?	

2b	Introduce fit and proper person test for trustees
36.	The ATO has found that not for profit organisations generally ‘show a strong desire to get it right, but often have a low level of knowledge about how the tax and superannuation systems work. Where compliance issues arise, they are mainly due to mistakes or a lack of knowledge.’
37.	The qualifications and skills of a PPF’s trustees affect not only whether a PPF meets its legal obligations, but also the essential philanthropic character of a PPF. The Government is of the view that those trusted with running PPFs should be qualified for the position, and thus proposes considering qualifications for PPF trustees. 
38.	The Government also recognises that not all trustees of PPFs are professional trustees, and that imposing training or other qualification standards may restrict the number of people eligible and/or willing to take on the role of trustee.
39.	Certain trustees are already required to meet stricter requirements, such as trustees covered by the Superannuation Industry (Supervision) Act 1993. In addition, tax agents must meet certain criteria to be considered a fit and proper person. The respective criteria for these fit and proper person tests are outlined in Appendix C.
Consultation question
•	If a fit and proper person test were introduced, what criteria should be imposed on trustees?	

2c	Move relevant provisions from Model Trust Deed into the Guidelines
40.	It is intended that certain requirements of the existing Model Trust Deed be moved into the updated Guidelines. Doing so will give the rules the force of law. It is intended that there then would be no binding model deed, however the ATO may provide a model deed to assist new PPFs.
41.	Notable clauses currently found in the Model Trust Deed include:
•	prohibition of benefit to the trustee (including any of its members or directors), the donor/founder or any associate, including uncommercial transactions (clause 5 in the Model Trust Deed); and
•	auditing requirements (clause 11.3 in the Model Trust Deed).
Consultation questions
•	Are there any other provisions presently in the Model Trust Deed that should be covered in the updated Guidelines?
•	Are there any provisions not in the Deed that should be in the updated Guidelines?    	

Principle 3 — PPFs are private
42.	The change proposed under this principle relates to limiting the number of PPF donors.
3a	Limit the number of PPF donors
43.	PPFs have been established as a vehicle to encourage private philanthropy. This characteristic implies that there is a close relationship between those who establish and those who donate to the fund, and is reflected in the Guidelines, which do not require a public fund to be maintained by a PPF.
44.	It is intended to keep the current requirement that public donations cannot be the primary source of PPF donations. Those wishing to seek donations from a larger group (for example, large companies) should use another fund structure, such as a PAF, as soliciting tax deductible public donations requires a different level of regulation which is not provided by the PPF framework.
45.	If a PPF’s circumstances change (for examples, donor numbers exceed the limit), it is proposed that the rules provide a mechanism for conversion of a PPF to a PAF.
Consultation questions
•	Would there be any disadvantages if a cap were introduced on the number of donors to a PPF (for example, a maximum of 20 donors over the life of the fund)?
•	Is conversion from PPF to PAF an acceptable mechanism to deal with changing PPF circumstances?  
•	What rules could be used to deal with the conversion from a PPF to a PAF?	

Principle 4 — PPFs are ancillary funds
46.	The change proposed under this principle relates to restricting PPF investment to only liquid assets.
4a	Restrict PPF investment to only liquid assets
47.	Notwithstanding the investment requirements imposed upon trustees by various state trust Acts, PPFs should have sufficient liquid assets to meet their philanthropic obligations. Illiquid assets donated to or held by a PPF should be converted to liquid form as soon as practicable if they are likely to affect a PPF’s ability to meet its philanthropic obligations. This change would have the advantage of ensuring that donations can be quickly distributed. Furthermore, the value of liquid assets is generally easier (and therefore cheaper) to determine and verify.
Consultation question
•	Would there be any disadvantages from introducing this limitation to the existing PPF investment rules?	

Appendix A — Guidelines for Prescribed Private Funds (PPFs) (including a model Trust Deed)
Guidelines for PPFs and a model Trust Deed can be downloaded from the Australian Taxation Office web site:
http://www.ato.gov.au/nonprofit/content.asp?doc=/Content/20926.htm

Appendix B — Current accumulation and distribution rules
After pre‑determining its target capital amount, a PPF must presently follow these rules: 
•	Before reaching target capital amount — if the PPF receives a donation for the entire target capital amount as a single up‑front donation, the PPF is not required to distribute any of that amount. Alternatively, if gifts of capital are made to the fund over a period of time, PPFs are required to make a minimum one‑off distribution of 5 per cent of the amount of the gift within the following year. This rule applies to the initial gift, as well as subsequent gifts.
•	After reaching target capital amount — PPFs are limited to growing in line with CPI in order to maintain the real value of the capital. All gifts must be distributed in the following year.
•	Investment income — all investment income must be distributed within one year of it being received, but an amount may be retained to maintain the capital at the beginning of an accounting period to reflect the movement in the CPI during the previous accounting period.
•	Capital gains — to the extent that realised capital gains exceed the adjusted capital base, they must be distributed. If unrealised capital gains are in excess of the approved capital base over any two consecutive financial years, the excess should be realised and distributed.

Appendix C — Fit and proper person tests applying to registrable superannuation entity (RSE) licensees and tax agents
Test applying to RSE licensees (which may be a constitutional corporation, body corporate, or group of individual trustees) — extract from the Superannuation Industry (Supervision) Regulations 1994 (Part 4, Division 4.2, regulation 4.14 Operating standard — fitness and propriety of RSE licensees):
(3)	Subject to subregulations (5) and (6), an RSE licensee meets the fit and proper standard if the RSE licensee possesses relevant attributes that enable the RSE licensee to properly discharge the duties and responsibilities of an RSE licensee in a prudent manner.
(4)	The attributes include, but are not limited to:
(a)	character, competence, diligence, experience, honesty, integrity and judgement; and
(b)	educational or technical qualifications, knowledge and skills relevant to the duties and responsibilities of an RSE licensee.
(5)	An RSE licensee that is a body corporate does not meet the fit and proper standard if:
(a)	the body corporate is a disqualified person; or
(b)	a director of the body corporate is a disqualified person, and the body corporate does not, within 14 days after the body corporate becomes aware that the director is a disqualified person:
(i)	notify APRA of that fact; and
(ii)	remove the director.
(6)	An RSE licensee that is a group of individual trustees does not meet the fit and proper standard if:
(a)	an individual trustee who is a member of the group of individual trustees (the member) is a disqualified person; and
(b)	the group of individual trustees does not, within 14 days after the group becomes aware that the member is a disqualified person:
(i)	notify APRA of that fact; and
(ii)	remove the member from the group.
(7)	An RSE licensee must meet the fit and proper standard for all the period during which the RSE licence continues in force.
Test applying to Tax Agents — the Tax Agents Boards, which register tax agents, declare that to be considered a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters one must meet certain criteria. The criteria are that an individual must:
–	have the appropriate qualifications and experience;
:	Qualifications — regulation 156 of the Income Tax Regulations 1936 sets out the prescribed qualifications as:  an accounting degree at a university or another educational institution of an equivalent standard; a law degree with eligibility for admission as a legal practitioner; a diploma/certificate in accounting at a TAFE college; or no formal qualifications (8 years experience required).
:	Experience — relevant employment is dependent on qualifications (1‑8 years required experience).
–	be at least 18 years of age;
–	be of good fame, integrity and character, with consideration given to: character references and convictions (in particular those relating to fraud, theft or deception);
–	not have been convicted of a serious taxation offence during the previous five years; and
–	not be under sentence of imprisonment, including being released on parole or good behaviour for a serious taxation offence.