Allowances or expenses paid to cover non-deductible items for an employee can be items such as normal home to work transport expenses. Verify with your Taxation Advisor what is deductible and non-deductible in your specific circumstance. When adding a Payroll transaction there is section called ‘Other Pay Types’. In this section you will find ‘Non-Deductible Allowance & Expense’.

Example

You want to deduct $200 per month from an employees salary to pay for their motor vehicle lease. The vehicle is owned by the employee and in this situation isn’t being used for work purposes (or if it is the employee may be claiming a tax deduction for the work use portion themselves in their own tax return).

Before the employee had the vehicle

After the employee had the vehicle