Creating a Non-taxable Rent Deduction Custom Pay Type

This example shows one possible set up of a custom pay type for an after-tax rent deduction.

Updated: October 2024

Your employee is renting a room from you at $80 per week.

Remember: If you are also providing housing or an accommodation allowance as part of their package, your employee still needs to pay tax on the value of this allowance as this is a benefit.
Follow this link to find out how to add this to their timesheet.

Let's break down this Rent example.

This deduction is:

❌	A regular payment I can use system pre-loaded pay types for.
✅	I prefer using a custom pay type for clarity on the payslip or/and reporting and tracking purposes.
✅	This is a non-taxable deduction, meaning after income tax has been calculated.

The custom pay type & timesheet should have the following:

✅	Custom pay type created in the *non-taxable section
✅	Rate: -1 (deduction rate is negative)\| Per: unit
✅	Rent amount entered on timesheet as applicable

Here is an example setup:

Create this custom pay type with a recognisable name in the Employee Profile - Pay Types tab and SAVE.

Select your recognisable pay type from the dropdown timesheet list.

Enter the rent amount on the agreed day.

The timesheet summary displays all non-taxable deductions together as one combined figure.

In this example, Aroha has two deductions from her Net pay: MOJ fine of $50 and her rent of $80 = deduction of $130 from her Net gives you the take-home pay of $358.40

Info - Blue Block (1) Reminder: Deductions set up with Custom Pay Types are not transferred to Thankyou Payroll and remain in your account to manage. They are excluded from the 'You deposit' amount.

We have a video that can help!

Follow this link to our video on creating a Non-Taxable Employee-Requested Deduction to see a similar Custom Pay Type setup.

Further Resources

Information on providing accommodation - IRD's website.
Need more information on creating custom deduction pay types? Follow this link to our dedicated article.