The Australian arm of one of the world’s biggest hotel businesses and most recognisable brands, Hilton Worldwide, is locked in a battle with the tax office over allegedly unpaid taxes amid accusations it set up a scheme to deliberately minimise its tax in Australia.

Hilton, the company founded by magnate Conrad Hilton – the great-grandfather of socialite and reality TV star Paris Hilton – in July launched legal action against the Australian Taxation Office in the Federal Court to dispute an assessment that found it owed $80.7 million in unpaid taxes as well as penalties and interest.

The 2022 accounts for Hilton’s Australian business, filed with the corporate regulator, show the ATO believes the company owes $51 million in taxes over the sale of its flagship Hilton Sydney property in 2015.

According to the accounts, the ATO has also sought $13 million in penalties and $15.7 million in interest from the company. Hilton has agreed, according to its accounts, to pay an instalment of $26 million to the ATO in response to the claim.

Hilton, which opened its first hotel in Australia in 1960 and operates 18 hotels across the country today, offloaded its 595-room Sydney Hilton property to Chinese investment house Bright Ruby in May 2015 for $442 million.

Hilton’s notice of appeal against the tax assessment filed in the Federal Court confirms that the dispute relates to a capital gain allegedly not recorded by Hilton in 2015. The court has redacted the amount still in dispute from the documents.

Hilton’s notice of appeal of its tax assessment shows that under the ATO’s anti-avoidance powers, authorities have accused the company of using a business structure and scheme designed to avoid tax.

Hilton said in its court filing that the ATO was wrong to make this assumption and that it had not sought to avoid tax by setting up a scheme to manage its Australian income.