From 1 July 1998, Youth Allowance (YA) replaced Youth Training Allowance, Newstart and Sickness Allowance for under 21 year olds, AUSTUDY for under 25 year olds and the higher rate of Family Allowance fo r16-18 year old secondary students.
YA was introduced to remove disincentives, present in the earlier system, for young people to participate in study or training.
YA seeks to:
- ensure eligible young people receive income while studying, looking for, or preparing for, paid employment;
- encourage young people to choose further education or training over job search if they do not have sufficient skills to obtain long-term employment; and
- encourage young people to undertake a range of activities that will promote entry into employment.
Young people must meet age, residency and activity test requirements.
Age
The minimum age is 16 years, although there are exceptions for some 15 year olds. The maximum age is 25 years for full-time students and 21 for other young people. A student receiving YA immediately before turning 25 can continue to receive YA until their course ends.
Residency
A young person must generally be an Australian resident and must present in Australia when they claim YA. Newly arrived migrants are required to serve a residency qualifying period of 2 years (104 weeks).
Activity Test
A young person meets the activity test if they are studying full-time, looking for work or doing a combination of activities. Young people do not have to meet the activity test if they have, for example, a temporary incapacity, a special circumstances exemption, or are claiming a Disability Support Pension.
Under 18 year olds who have not completed Year 12 or equivalent are encouraged and expected to be in full-time education or training, although there are some exemptions. Where full-time education or training is not appropriate for a young person they may still qualify for Youth Allowance by entering into an activity agreement that generally would include some form of appropriate part-time education or training.
Full-time apprentices or trainees employed under an industrial agreement who have a training agreement with a training authority do not qualify for YA.
Parental Means Test
A parental means test applies unless the young person is assessed as independent, or the parent receives income support or a payment under the exception circumstances provisions of the Farm Household Support Act 1992. The parental means test has three parts: parental income, family assets and family actual means tests (FAMT).
Young people are exempt from the parental means test where either of their parents is on a pension or benefit, unless they are also self-employed and then the FAMT still applies.
The parental income and asset test does not apply where a young person's parent(s) have a low income Health Care Card. However the family actual means test still applies.
Maximum YA is paid if combined parental income is under $28,150 per annum. This threshold increases by between $1.230 and $7,585 for other dependent children in the family, depending on ages and circumstances. Payments reduce by 25 cents in the dollar for parental income above the threshold.
Personal and Partner Income and Assets Test
The YA personal income test allows full-time students to have income of $236 per fortnight ($62 per fortnight for other young people) before payments are reduced. The first $80 of income over these income free areas reduces fortnightly income by 50 cents in the dollar. Any income beyond this reduces fortnightly allowance by 70 cents in the dollar. A partner income test also applies.
A personal assets test applies to independent YA recipients unless their partner receives income support. Assets of dependent allowees are included in the family assets test.
Full-time students/trainees have access to the student income bank, which allows them to keep more of their Youth Allowance where they earn income over short periods like vacation employment. Any unused part of their fortnightly income free area of $236 per fortnight is accumulated in the income bank, up to a maximum of $6,000. The student income bank balance is then used to offset the effect of casual earnings over the income free area.
Young people are independent and exempt from the parental means test for Youth Allowance if (they):
are, or have been, self-supporting through employment (conditions apply); or,
- or a refugee;
- are in State care;
- it is unreasonable for them to live at home;
- are 18 years of age or older and have a work history but who experience education or employment disadvantage;
- are, or have been. a member of a couple (conditions apply);
- have, or have had, a dependent child,
- are aged 25 years or over;
- are orphaned; or
- have parents who cannot exercise their responsibilities because they are in prison, a psychiatric hospital, or similar.
The 'away from home' rate of YA is available to:
- dependent young people who need to live away from the parental home for study or job search
- independent young people living away from the parental home;
- independent young people living in the parental home who have had a child, or who are/were a member of a couple; and
- young people in State care who are not supported by the States/Territories (by payments to themselves or indirect payments to other people or organisations).
Recipients can get between $250 and $500 of their entitlement advanced each 12 months. The advance is recovered by reduced fortnightly payments over the following six months.
YA recipients who are NOT full-time students have automatic entitlement to a Health Care Card (HCC). Full-time students do not have automatic entitlement to a HCC, but most will qualify for a HCC under the Low Income Card (LIC) Scheme. Full-time students must apply separately for a LIC.
YA recipients receive Pharmaceutical Allowance and if living in a particularly remote location, Remote Area Allowance. Fares Allowance is also available to tertiary students on YA who need to live away from their permanent home for study reasons.
Further information on rates of payment, personal and parental income limits can be found on the Centrelink 
website