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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. The four main objectives of the evaluation 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. This report presents the main findings of the three-year evaluation and builds on the data and findings presented in the 1999 interim report. It includes a more detailed assessment of the impact of YA over the three years since its introduction. The report is structured around the four evaluation objectives. The first part of the report provides information on the policy background of YA, changes introduced by YA and YA customer characteristics, and trends affecting young people generally, such as Year 12 retention and the youth labour market. Part two provides an overview of the evaluation strategy and methodology. Part three contains four sections which present the main findings about the impact of YA on: youth participation and education; marginalised youth; family support of young people; and simplicity and efficiency of income support arrangements for young people. The evaluation revealed that YA had been successful and key findings were that the requirements of YA had led to a sustained increase in education retention rates and that the YA payment had been a key factor in the post-school study plans of YA recipients.