A tax-free salary in Dubai: when Australia still wants its share

The UAE doesn't tax your salary. Whether Australia does comes down to one question: are you still an Australian tax resident? Get that wrong and the "tax-free" package can turn into a very large ATO bill.

The short version

• The UAE does not levy income tax on individuals. It does charge 5% VAT on goods and services [1].
• Australian tax residents are taxed on their worldwide income, including a Dubai salary. Foreign residents are taxed only on Australian-source income [2][3].
• Australia has no tax treaty with the UAE, so there's no treaty to fall back on if both sides see things differently [4].
• The foreign employment income exemption almost never helps a private-sector job in Dubai. It covers narrow categories such as aid work and disciplined force deployments [5].
• Leaving residency has its own costs: capital gains tax on some assets, withholding on Australian interest and dividends, and HELP reporting [6][7][8].

Why "tax-free" isn't automatic

Australia taxes its residents on income from everywhere. If the ATO considers you an Australian resident while you're working in Dubai, your Dubai salary goes on your Australian tax return like any other income.

Usually, when you pay tax overseas, you can claim a foreign income tax offset to avoid being taxed twice. In Dubai, there's no income tax to offset. So if you remain an Australian resident, the whole salary can be taxed at Australian resident rates, with nothing knocked off.

There's no Australia–UAE tax treaty either. Treasury's list of Australia's income tax treaties covers 47 jurisdictions, and the UAE isn't one of them [4]. That means your status comes down to Australian domestic law alone.

The residency tests, in plain English

Citizenship doesn't decide tax residency. The ATO applies four statutory tests. You're a resident if you meet the first, or if you fail it but meet any of the other three [2].

The resides test

The ATO looks at a mix of factors, and no single one decides it: how long you're physically in Australia, your intentions, your behaviour, family and work ties, where your assets are, and your social and living arrangements, such as where the kids go to school and whether your mail is redirected [2].

The domicile test and your "permanent place of abode"

This is where most Dubai cases are decided. Australians who work overseas usually keep their Australian domicile unless they permanently migrate. So the ATO asks whether you've established a permanent place of abode outside Australia [9].

"Permanent" doesn't mean forever. It means the opposite of temporary or transitory. The ATO looks at the intended and actual length of your stay, whether you have an established home overseas, whether you keep a home in Australia, and your family and financial ties [9]. Someone who moves between countries without settling anywhere hasn't adopted a permanent home elsewhere, so they stay a resident [9].

Two examples from the ATO

The ATO's own examples make it concrete [2]:

• Emily teaches in Japan on a one-year contract, rents out her Australian home and plans to come back. Her domicile and permanent place of abode stay in Australia, so she remains an Australian tax resident.
• Bronwyn, her husband and three children move overseas for a three-year job, set up a home there and rent out the family house. She fails the resides and domicile tests and is a foreign resident, even though she intends to come back.

The difference isn't the plane ticket. It's whether life has genuinely moved. A Dubai version of Bronwyn (family with you, an Ejari-registered lease, kids in a Dubai school, a residence visa and an Emirates ID) points one way. A Dubai version of Emily (short contract, partner and house still in Sydney) points the other.

What changes when you become a foreign resident

If you're a foreign resident for tax purposes, Australia still taxes your Australian-source income: rent from an Australian property, capital gains on Australian real estate, and Australian employment income [3]. In 2025–26, foreign residents pay 30% from the first dollar up to A$135,000, 37% to A$190,000 and 45% above that, with no tax-free threshold [10].

The year you leave

You're a resident for the part of the year before you leave. You can claim a pro-rata tax-free threshold for the months you were a resident, counting the month you left, and you're taxed at resident rates for that year [2]. After you cease residency, you don't report your Dubai salary, and you can claim exempt days from the Medicare levy [2].

Interest and dividends

Tell your Australian bank and share registries that you're a foreign resident, and give them your Dubai address. They'll then withhold tax at source: 10% on interest and 30% on unfranked dividends for countries without a treaty, which includes the UAE. If they don't have your overseas address, they may withhold at 47% [7]. Once the right withholding is taken, you don't put that income on an Australian return [3].

Capital gains tax on the way out

When you stop being a resident, you're generally treated as having sold assets such as shares at market value on that date. You can choose to disregard those gains and losses instead, in which case the assets stay in the Australian tax net until you sell them or return [6]. Australian real estate isn't caught by this deemed sale, but when you eventually sell, foreign residents can only claim the 50% CGT discount for the period they were residents [6]. Foreign residents also face tight limits on the main residence exemption for a former home, so get advice before selling your house while living in Dubai.

HELP debts

If you live overseas for 183 days or more in a 12-month period, you must lodge an overseas travel notification within seven days of leaving and then report your worldwide income each year by 31 October. For 2025–26, if your worldwide income is at or below A$16,750 you lodge a non-lodgment advice instead [8]. A tax-free Dubai salary still counts as worldwide income for HELP.

The foreign employment income exemption: probably not you

Section 23AG of the tax law exempts some foreign earnings for Australian residents, and it gets mentioned at every Dubai brunch. In reality, it only applies if you've worked overseas as an employee for at least 91 continuous days and the work is directly attributable to specific activities: delivering Australian official development assistance, working for certain relief funds or prescribed charitable or religious institutions, or deployment with the ADF or Australian police [5]. A role at a Dubai bank, school, hotel or construction firm doesn't qualify.

A practical checklist before your first Dubai payslip

1. Decide what your move really is. A two-year stint with family in Australia looks very different from relocating the household.
2. Use the ATO's residency tool and keep a record of your answers and the facts behind them [2].
3. Gather evidence of your Dubai life. Employment contract, residence visa, Emirates ID, Ejari lease, school enrolments and utility bills.
4. Update your banks and share registries with your foreign resident status and UAE address [7].
5. Lodge your Australian return for the year you leave, using the pro-rata tax-free threshold [2].
6. Lodge a HELP overseas travel notification within seven days of leaving, if it applies [8].
7. Think before selling Australian assets. Timing around residency can change the tax result a lot.
8. Talk to a registered tax agent who works with expats if your situation is anything other than simple.

Tax questions come up a lot in Cooee UAE, our Facebook group for Australians in the UAE. Members can share experiences, but for your own return, use a registered tax agent.

Sources

1. Taxation – u.ae (UAE Government portal)
2. Your tax residency – Australian Taxation Office
3. Foreign and temporary residents – Australian Taxation Office
4. Income tax treaties – The Treasury
5. Exempt income from foreign service – Australian Taxation Office
6. How changing residency affects CGT – Australian Taxation Office
7. Interest, unfranked dividends and royalties – Australian Taxation Office
8. Overseas repayments – Australian Taxation Office
9. Residency – the domicile test – Australian Taxation Office
10. Tax rates – foreign residents – Australian Taxation Office

Keep reading

• Are you still an Australian tax resident once you move?
• Moving to Dubai from Australia: the complete guide
• Your super while you live overseas
• Keeping your Australian bank, number and accounts while abroad