The movement to replace old, inefficient gas and electric hot water systems with modern, energy-efficient heat pumps is accelerating across Australia. For residents of Victoria (VIC) and New South Wales (NSW), 2026 brings substantial financial incentives to make this switch. These heat pump rebates are key to lowering your energy bills and reducing your home’s environmental footprint. Both state governments are actively encouraging this transition as part of their broader climate action and energy savings goals.
A heat pump hot water system is up to three times more efficient than traditional electric or gas systems. They work like an upside-down refrigerator, drawing heat from the surrounding air to warm the water. This smart technology is not only better for the planet but also significantly cheaper to run in the long term. These major savings, combined with the current government rebates, make 2026 the perfect time to upgrade your home.
Understanding Heat Pump Rebates in VIC
Victoria offers some of the most generous incentives nationwide for upgrading to a high-efficiency hot water system. The state uses a ‘stackable’ approach, meaning you can often combine multiple programs for maximum savings. The two main programs are the Victorian Energy Upgrade (VEU) and the Solar Homes Program’s Hot Water Rebate.
Victorian Energy Upgrades (VEU) Program
The Victorian Energy Upgrades (VEU) program is the foundation of energy savings for Victorian households and businesses. It provides an upfront discount on the cost of an approved heat pump hot water system. This discount is provided by an Accredited Provider and is based on the energy savings your new system is expected to deliver over its lifetime.
- How the VEU works: VEU creates Victorian Energy Efficiency Certificates (VEECs) for every eligible installation. These certificates have a monetary value that is passed directly to you as a discount. This means you pay less upfront for your new heat pump hot water system.
- Discount value: The discount value fluctuates with the VEEC market. Historically, the discount for replacing an inefficient electric or gas system with a heat pump has ranged from hundreds to thousands of dollars. It can cover a significant portion of the product and installation costs.
Solar homes hot water rebate
The Solar Homes Program offers an additional, separate hot water rebate that can be stacked on top of the VEU discount. This is a substantial financial boost explicitly aimed at helping owner-occupiers install a solar or heat pump hot water system, with eligible rebates.
- Rebate amount: Eligible households can receive a rebate of up to $1,000 off the purchase price of an eligible heat pump or solar hot water system. The rebate is calculated as 50% of the purchase price, capped at $1,000.
- Locally made bonus: From mid-2025, a higher rebate of up to $1,400 is available to households that choose an eligible locally made hot water product. This is a major increase designed to support local manufacturing.
- Eligibility for Solar Homes: This program has specific criteria. You must be an owner-occupier, the combined taxable income of all owners must be under $210,000 per year, and the property value must be under $3 million. The system must replace an existing hot water system that is at least three years old.
Maximising your NSW heat pump rebates
New South Wales (NSW) also offers strong financial incentives to encourage the adoption of more energy-efficient appliances. The primary avenue for accessing these savings is the NSW Energy Savings Scheme (ESS), which functions similarly to the Victorian program.
NSW Energy Savings Scheme (ESS) Discount
The NSW Energy Savings Scheme (ESS) is designed to reduce energy consumption by providing financial incentives for energy-saving upgrades. For hot water, this means a discount on the upfront cost of installing a heat pump hot water system.
- Upfront discount model: Like the VEU, the ESS is not a traditional ‘rebate’ that requires you to wait for a cheque. Instead, the incentive is provided as an immediate discount on the installer’s quote. This immediately reduces the upfront financial barrier.
- Certificate creation: Savings are generated by issuing Energy Savings Certificates (ESCs). Your accredited installer will create and assign these ESCs to an Accredited Certificate Provider (ACP), who then passes the value to you as a discount.
- Discount range: The discount amount varies based on the type of system you are replacing and your location. Generally, replacing an old electric water heater with an air-source heat pump yields a larger discount than replacing a gas heater. Discounts can range from several hundred dollars.
- Accredited installers are key: You must use an installer who is partnered with an ACP under the ESS. They handle all the paperwork and certificate assignment, ensuring a smooth process.
Federal Government’s STC Scheme
Residents in both VIC and NSW can combine their state rebates with the Federal Small-scale Renewable Energy Scheme (SRES). This scheme awards Small-scale Technology Certificates (STCs) for the installation of eligible hot water heat pumps.
- STC value: The number of STCs you receive depends on the system’s size, efficiency, and your location (zone). Each STC has a monetary value that is typically deducted from the purchase price by your installer.
- Maximum savings: Combining the state program (VEU or ESS) with the Federal STC scheme significantly reduces the upfront cost of your new heat pump hot water system. This stacking is what makes the switch so financially appealing in 2026.
Eligibility and application for heat pump rebates
Applying for these heat pump rebates and discounts is simpler. Crucially, in both states, the installer you choose will manage most of the paperwork for the VEU and ESS upfront discounts, making the process almost seamless for you.
Key eligibility requirements
While specific details vary, the core requirements for the state incentives are similar:
- Replacement: You must replace an existing inefficient hot water system (electric resistance or gas) with an eligible heat pump unit.
- Accredited provider: The system must be supplied and installed by an installer/retailer accredited under the relevant state program (VEU in VIC; ESS in NSW).
- Approved product: The specific heat pump model must be on the state’s official list of approved, high-efficiency products. Always check the VEU or ESS product register before purchase.
- Property type: Incentives are generally available for residential owner-occupiers and private rental properties. There are also incentives for businesses.
The simple application process
For the upfront discounts, the steps are straightforward:
- Compare quotes: Contact multiple accredited retailers/installers for quotes on an eligible heat pump hot water system. Ensure the quote clearly shows that the government discount (e.g., VEU or ESS) has been applied.
- Verify eligibility: Your chosen installer will check your property and current system against the program rules.
- Installation & paperwork: Once installed, you will sign documentation (such as the VEEC or ESC assignment form) to transfer the certificate rights to the provider, thereby securing your upfront discount.
- VIC Solar Homes Rebate: If in VIC, you must apply for the Solar Homes Hot Water Rebate before installation and receive an eligibility letter. This is a crucial additional step for VIC residents seeking the stackable rebate.
Heat pump rebates summary for VIC and NSW (2026)
This table summarises the core government incentives available for your new heat pump hot water in 2026.
| Feature | Victoria (VIC) | New South Wales (NSW) | Australia-Wide |
| Main program | Victorian Energy Upgrades (VEU) | Energy Savings Scheme (ESS) | Small-scale Renewable Energy Scheme (SRES) |
| Format | Upfront discount | Upfront discount | Upfront discount (STCs) |
| Stackable rebate (residential) | Solar Homes Hot Water Rebate (up to $1,400) | No direct equivalent stackable rebate | Yes (with state schemes) |
| Application method | Installer handles VEU discount; Homeowner applies for Solar Homes Rebate pre-install | The installer handles the ESS discount upfront | The installer handles STC assignment upfront |
| Typical savings (total) | High (Discount + Rebate + STCs) | Moderate to High (Discount + STCs) | Varies by system and location |
Sources and further reading in heat pump rebates: Solar Victoria – Hot water rebate | Victoria Energy, Environment and Climate Change – Victorian Energy Upgrades Hot water system discounts | NSW Climate and Energy Action – Energy Savings Scheme
Why upgrade now? The Energy Matters action plan
Switching to a heat pump hot water system offers compelling reasons beyond the substantial 2026 rebates. These efficient units provide significant, long-term savings by dramatically reducing energy consumption. They are the ideal choice for an electric home, especially when paired with a solar photovoltaic (PV) system.
A solar-powered heat pump can provide virtually free hot water year-round. This is an investment that reduces your dependence on expensive grid electricity and on polluting fossil fuels such as natural gas. Act now to lock in these government incentives and start saving on your power bills. Don’t wait for rebate changes or budget caps to impact your savings potential.
Leap to an electric, energy-efficient future. Contact Energy Matters today to get a quote from an accredited installer and find the perfect heat pump hot water system that qualifies for the VIC or NSW rebates in 2026. Maximise your savings and start your transition away from gas!
