---
title: Creating a Non-taxable Deduction Custom Pay Type
description: This example article shows how to set up a custom pay type for an after-tax WINZ deduction or other court order fines. (NOT for Ministry of Justice Fines)
---

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# Creating a Non-taxable Deduction Custom Pay Type

## This example shows a WINZ deduction but can also be used for other after tax deductions such as  Ministry of Social Development 

*Updated: October 2025*

You have received a notice to start making deductions for Work and Income NZ from your employee’s pay- an amount of $52 per pay until advised to stop.

| ![Info - Blue Block (1)](https://help.thankyoupayroll.co.nz/hs-fs/hubfs/KnowledgeBase/CalloutIcons/Info%20-%20Blue%20Block%20(1).png?width=52&height=52&name=Info%20-%20Blue%20Block%20(1).png) | As this is a government department, you don't need your employee's consent to make these deductions. **It is your legal responsibility as an employer to do this deduction**. |
| --- | --- |

Let's break down this WINZ example.

**This deduction is**:

|  ❌  | A regular payment I can use [system pre-loaded pay types](https://help.thankyoupayroll.co.nz/en/discovering-pre-loaded-pay-types?hsLang=en) for. |
| --- | --- |
| ❌ | A Ministry of Justice Fine. [Go here to see how to do this in Thankyou Payroll.](https://help.thankyoupayroll.co.nz/en/ministry-of-justice-payments?hsLang=en) |
| ✅ | A payment to WINZ or other court order deduction. |
|  ✅ | 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 |
|  ✅ | WINZ amount entered on timesheet as applicable |

**Here is an example setup:**

> ![S11CPT\_WINZDeduction](https://help.thankyoupayroll.co.nz/hs-fs/hubfs/KnowledgeBase/screensteps/Employee%20Settings/ExampleScenarios/S11CPT_WINZDeduction.png?width=608&height=592&name=S11CPT_WINZDeduction.png)
> 
> - 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 WINZ deduction amount on a timesheet day.
> - The timesheet summary displays all non-taxable deductions together as one combined figure.

| ![Take Care - Red Block](https://help.thankyoupayroll.co.nz/hs-fs/hubfs/KnowledgeBase/CalloutIcons/Take%20Care%20-%20Red%20Block.png?width=52&height=52&name=Take%20Care%20-%20Red%20Block.png) | Remember: You have to manage this payment to the third party from your business bank account as the funds remain there. \***Deductions set up with custom pay types are excluded from the 'You deposit' amount and must be managed by you**. |
| --- | --- |

<iframe width="256" height="192" src="https://www.youtube.com/embed/prihr_oAuKo?feature=oembed" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" referrerpolicy="strict-origin-when-cross-origin" allowfullscreen title="Setting Up A WINZ Deduction" style="position: absolute; top: 0px; left: 0px; width: 100%; height: 100%; border: none;"></iframe>

---

### Further Resources

- [WINZ debt deduction information - Work and Income's website](https://www.workandincome.govt.nz/employers/employee-debt-deduction.html).
- Need more information on [creating custom deduction pay types? Follow this link to our dedicated article](https://help.thankyoupayroll.co.nz/en/custom-deduction-pay-types?hsLang=en).

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