Excellent summary, verticleroll, thank you.
Out of curiousity, if you receive a commuting allowance does that mean you have to nominate a specific country as your domicile?
As you have stated, "You enter Japan on a crew shorepass (valid for 7 days) so technically can't live in Japan" - therefore is the "[i]$US72/day allowance when out of home base", paid for the entire time you are away from (say) Australia?
Or do they conveniently nominate you as being "based" in KIX, without allowing you - in fact - to be based there?
Have you had any hard evidence that the contractor IS paying tax somewhere for you?
An investigation by the ATO would require you to prove that you held "resident" status in a foreign country, to remove your obligation to paying Oz tax (if you are an Australian citizen).
The following as an example from the ATO website:-
Bronwyn – an extended job overseas
Facts
Bronwyn, a resident of Australia, has received a job offer to work overseas for three years, with the option to extend for another three years.
Bronwyn, her husband and three children decide to make the move.
They retain their property in Australia, as they intend to return one day.
The house will be rented out during their absence.
Bronwyn is uncertain whether she will extend the option to stay after three years, and will decide later, depending on how the family like the life there.
While overseas, they will rent a house with an accommodation allowance provided under her contract.
Outcome: why is Bronwyn considered a non-resident?
The following table outlines the reasons why the four residency tests were not satisfied.
Test
resides - she is not physically present in Australia, even though she has maintained the family home in Australia.
domicile - her permanent place of abode is outside Australia due to:
the length of time she has committed to spending overseas
establishment of a home overseas, and
her family accompanying her.
the fact that she will not be selling the home in Australia, although relevant, is not persuasive enough to overcome the finding on the basis of the other factors.
it is arguable that she has abandoned her home in Australia for the duration of her stay, by renting it out.
183 day rule - this does not apply from the date of her departure for overseas.
superannuation - this does not apply.
The following example (again from the ATO site) might also be useful:-
Emily – teaching in Japan
Facts
Emily leaves Australia to work in Japan as a teacher of English.
She has a one-year contract, after which she plans to tour China and other parts of Asia before returning to Australia to resume work here.
During her time in Japan, she lives with a family who treat her as one of their own.
She rents out her property in Australia during her absence.
Emily is single. Her parents live interstate, and her brother has moved to France.
Outcome: why is Emily considered a resident?
Even though Emily is residing in Japan, under the domicile test:
her domicile is in Australia (a resident who has always lived in Australia will generally retain a domicile here when they are absent overseas, unless they choose to permanently migrate to another country), and
her permanent place of abode remains in Australia.
Good Luck.
BTW, Japan DOES have female pilots - no Captains with any of the airlines yet, to the best of my knowledge, but a spattering of (female) F/O's in various airlines.