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Youth Allowance (YA) is an income support scheme for students aged 16 to 24 years and jobseekers aged 16 to 21 years. The payment was introduced by the Australian government at the beginning of July 1998 to address concerns that previous income support arrangements for young people were inadequate and not supportive of young people to be in full-time education or training. The main objectives of YA are: to ensure that young people receive adequate income support whilst studying, seeking work, or preparing for work; to encourage young people to undertake further education and training to gain the skills required for long-term employment; and to encourage young people to take up a range of activities that will promote their entry into employment. The Department of Family and Community Services (FACS) has developed a comprehensive three-year evaluation strategy to assess the short- and medium-term impact of YA. This interim report of the evaluation provides an initial assessment of the impact of YA over the first full year since its introduction. The report is structured around the four main objectives of the evaluation which are to determine: (a) how effectively YA has encouraged young people to participate in education or training thus increasing their opportunities in the labour market; (b) the extent to which education and training institutions have developed appropriate pathways for a wider range of young people than previously; (c) the impact of YA on young people and their families; and (d) whether the amalgamation of different payments into YA has produced significant benefits. The report provides an overview of YA and the scope and objectives of the evaluation. It then presents interim findings in relation to its impact on participation in education and training and on education systems, on young people and their families, particularly in rural and remote communities, and on the efficiency and simplicity of income support arrangements for young people. It also discusses future work to be undertaken within the evaluation. Several appendices are included.