The VEU discount on heat pump hot water, step by step

The Victorian Energy Upgrades discount on a heat pump water heater is not attached to the new unit. It is attached to the old one. The program pays for the energy the old tank will stop using, so most of the rules are about what is being taken out, not what is going in. Once you see it that way, the rest makes sense.

What has to come out

Under the Essential Services Commission's activity guide (version dated 15 April 2026), there are two heat pump activities for homes:

• replacing an electric resistance water heater with a heat pump water heater
• replacing a gas or LPG water heater with a heat pump water heater

An electric resistance water heater means a tank that heats only with an element. A gas or LPG water heater means one that heats only by burning gas. There is one useful extra: an old solar water heater whose solar side has died counts too, as long as the solar parts are out of warranty and at least five years have passed since it went in. The booster is doing all the work by then, so the program treats it the same as a plain electric or gas tank.

The old heater has to be connected to its supply before it is decommissioned. The guide allows an exception where it was disconnected for safety reasons. Then it has to be made permanently unusable and taken away, and the installer photographs it in place first, showing the brand, model and serial number. On a gas unit the photos also show the gas pipe sealed or capped.

What the house has to be

The house must not have been finished within the two years before the work. That rules out new builds. The limit is two heat pump water heaters per home, and only one new unit for each old one taken out.

What the new unit has to meet

The heat pump must be on the VEU Register of Products, certified to the Australian standard for water heaters, under 700 litres of storage, and modelled to save at least 60 per cent of the energy under the program's method. It must use a refrigerant with a global warming potential below 700. From 31 March 2025 it must also carry a warranty against defects of at least five years.

One installation detail matters: the guide says the new unit must not be plumbed in line with an extra storage tank or a second hot water system.

What you pay, and when

Since 1 February 2025 there has been a minimum co-payment. For these hot water activities it is $200 including GST per unit, paid by you to the accredited provider before the certificates can be created. The provider is not allowed to hand any of it back to you in money, goods or services.

Before you agree to the job, the accredited provider or their installer must give you the current VEU water heating consumer fact sheet, tell you plainly whether the unit suits your household, and say whether its size matches what the fact sheet recommends. If nobody has talked about size, ask.

The discount itself is applied by an accredited provider, and how much it is varies with the provider, the product and the market price of the certificates. If you are weighing up a heat pump, ask us whether your job is likely to qualify and we can point you in the right direction.

Stacking it with Solar Homes

The Solar Homes hot water rebate is a separate state program, run through Solar Victoria. At the time of writing its page (updated 20 October 2026) says:

• the rebate is 50 per cent of the purchase price, worked out after other discounts such as VEU certificates, up to $1,000, or up to $1,400 for an eligible locally made product
• you must own and live in the home, all owners' combined taxable income must be under $150,000 a year, and the property must be valued under $3 million
• the system being replaced must be at least three years old
• the work must be done by an authorised hot water retailer

Solar Victoria says the two together can take up to $1,960 off a locally made system, or up to $1,630 off another eligible system, where the retailer is also a VEU provider.

The 2027 rule for gas tanks

From 1 March 2027, under Victoria's building electrification rules, a gas hot water system in an existing home that needs replacing must be replaced with an electric one. Gas systems can still be repaired. If your gas tank is getting on, it is worth planning the change rather than doing it in a hurry with cold showers. We cover the background in Victoria's gas rules in plain words.

Where we come in

We install and service heat pump water heaters around Daylesford, Hepburn, Castlemaine, Trentham and Kyneton. Up here the unit has to make hot water on frosty mornings, so where it sits and how it is set matters as much as the badge. There is more on our heat pump hot water page, and on timing one to your panels in heat pump hot water off your solar.

If you would like us to look at your tank and talk it through, get in touch through our contact page or ring 0417 734 206, Monday to Friday, 8:00am to 4:30pm.