Beyond the Beach: 7 Reasons Smart Investors Are Buying in Dubai and Cyprus

A colleague sends you a listing with a skyline photo and a line about zero tax. You start wondering whether you have been looking in the wrong markets. Plenty of Australians aged 30 to 60 ask the same thing once they have savings, super, and a clear idea of what they want property to do for them.

The seven points buyers usually raise

These are the points that tend to come up in offshore property conversations. Treat each one as a starting question, not a conclusion.

1. No personal income tax in the UAE. Dubai does not tax individuals on rent, which is a large part of the appeal. Australian residents still report that rent at home.
2. A second base. Some buyers want a place to stay when they travel, or a future option to live abroad.
3. Off-the-plan pricing. Many projects are sold before completion, with deposits paid in stages. How those deposits are held, and what protection applies, varies. Ask who holds the money.
4. Currency exposure. The property is priced in a foreign currency. Your position in Australian dollars moves with exchange rates, even if the local price does not.
5. An EU member state. Cyprus sits inside the EU, which some buyers find reassuring. Title, contract, and transfer rules still need local legal advice.
6. Tax treaty coverage. Whether Australia has a tax treaty with the country affects how income is taxed. This is easy to overlook.
7. Portfolio spread. Some buyers want assets outside Australia to reduce reliance on one market. Spreading holdings does not remove risk, and the decision belongs with you and your advisers.

What the Australian rules mean for offshore rent

Residency is the starting point. The ATO says an Australian resident for tax purposes must declare income earned anywhere in the world, and that includes rental income from real estate overseas (ATO). Where tax has already been paid abroad, a foreign income tax offset may provide some relief. Where the foreign country levies no income tax, there is nothing to offset, so the Australian return carries the full tax on the rent (Odin Tax).

Treaty coverage is less settled than many listings suggest. One commentary lists the UAE among countries with no double tax agreement with Australia (Odin Tax). For Cyprus, sources disagree. One treaty summary describes withholding rates under an agreement in force (Tax in Pangea), while Australian government announcements from 2022 and 2024 describe negotiations for a treaty (Orbitax). Check the current position on the ATO's treaty list before relying on either version.

Where SMSF rules come in

Every SMSF investment must pass the sole purpose test. An ATO director reportedly said a fund fails the test if it gives a pre-retirement benefit to anyone, such as personal use of a fund asset (SMSF Adviser). In a Swiss chalet case, members and friends stayed in fund property without paying rent, and the fund was held to have breached the test (DBA Lawyers).

Overseas property also has to be valued annually, like other fund assets (InfoChoice). One SMSF commentator notes that mainstream lenders generally do not write borrowing over foreign residential property, so overseas purchases are often made in cash (JanusHermes). Separately, from 10 August 2026 an SMSF can no longer take out a new residential LRBA, so the Australian residential route for funds changes from that date.

A worked example

Consider a 45-year-old resident on a salary who buys an apartment overseas for AUD 650,000 in cash. These figures are illustrative only. Suppose the apartment rents for AUD 36,000 a year, with AUD 9,000 in costs such as management, service charges, and insurance. The net AUD 27,000 is added to assessable income and taxed at the buyer's marginal rate. If the local rent carries no local income tax, the foreign income tax offset gives nothing back. The buyer also converts rent into Australian dollars, so the figure on the return moves with the exchange rate.

The rent figure is an example, not a projection. Realistic rent depends on local demand, vacancy periods, and the property itself. An independent rental appraisal matters here.

If the same apartment sat inside an SMSF, the sole purpose test would apply to the fund, family members could not use the property, and the fund's own tax position would depend on its phase. Each of these points needs specialist input.

An overseas property still sits inside the Australian tax system if you are an Australian resident. The useful question is what the rent and the ownership structure look like once it does.

What to do next

1. Confirm your residency position first. A registered tax agent or tax adviser can explain how your status affects overseas rent and any future sale. The insights blog has more background reading.
2. Bring in an SMSF specialist if a fund is involved. Ask them to check the trust deed, the investment strategy, and the sole purpose test before any numbers are compared.
3. Get local legal advice in the country where the property sits. A solicitor or conveyancer there can cover title, contracts, deposit protections, and transfer costs. If you want to compare an overseas purchase with an Australian one, book a free call or send an enquiry. You can also see our services.

General information only, not personal financial advice. Speak with a licensed adviser before acting.