Network manager doesn't work with option: dns=dnsmasq

[Alexandr]

$ lsb_release -a
No LSB modules are available.
Distributor ID: Ubuntu
Description: Ubuntu Bionic Beaver (development branch)
Release: 18.04
Codename: bionic

$ uname -a
Linux alex-VirtualBox2 4.15.0-13-generic #14-Ubuntu SMP Sat Mar 17 13:44:27 UTC 2018 x86_64 x86_64 x86_64 GNU/Linux

$ apt-cache policy network-manager
network-manager:
  Installed: 1.10.6-2ubuntu1
  Candidate: 1.10.6-2ubuntu1
  Version table:
 *** 1.10.6-2ubuntu1 500
        500 http://au.archive.ubuntu.com/ubuntu bionic/main amd64 Packages
        100 /var/lib/dpkg/status

$ apt-cache policy dnsmasq
dnsmasq:
  Installed: (none)
  Candidate: 2.79-1
  Version table:
     2.79-1 500
        500 http://au.archive.ubuntu.com/ubuntu bionic/universe amd64 Packages
        500 http://au.archive.ubuntu.com/ubuntu bionic/universe i386 Packages

Once I set:
[main]
plugins=ifupdown,keyfile
dns=dnsmasq # <- this line was added
...

DNS resolving stops to work.

$ ping google.com.au
ping: google.com.au: Temporary failure in name resolution

$ nslookup google.com.au
Server: 127.0.0.53
Address: 127.0.0.53#53

** server can't find google.com.au: SERVFAIL

it's only one setting I changed. /etc/NetworkManager/dnsmasq.d folder is empty.

[Alexandr (alexvkapustin)]

Sorry, but it seems like caches settings, even after Network-manager has been restarted.
After system reboot it was fine with that option, so I copied my file configuration back to /etc/NetworkManager/dnsmasq.d, was also fine, but settings from that file did not take effect.
After reboot it stops to resolve any DNS address as per description.
here is my conf file:

#addn-hosts=/home/alex/docker/test/system-config/hosts
server=/my-super-domain.com.au/172.18.0.1