VEU Heating and Cooling Discounts: What You'll Actually Pay

The government does help pay for a new reverse-cycle air conditioner through the VEU discount. You might see it advertised as free, but there's a mandatory co-payment that most advertising glosses over.

I want to walk you through how it actually works before you get surprised halfway through a quote.

The Vic Energy Upgrade (VEU) heating and cooling discount is real. But it works differently to how most people picture a rebate — it's applied upfront at point of sale, not claimed back later, and it comes with a mandatory co-payment that changes the actual out-of-pocket cost.

What the discount actually is

This isn't a cheque that arrives after you buy a system. It's a price cut applied at the point of sale, funded through tradeable Victorian Energy Efficiency Certificates (VEECs) that accredited providers generate and sell.

In practice, that means an accredited installer builds the discount straight into your quote. There's no separate claim form to fill out afterwards.

When you're ready for a quote, ask your provider to show the VEU discount as a separate line item on the paperwork before any work starts.

Does it apply to you

All Victorian households and businesses are eligible, no income test involved. That includes private rentals.

Heating and cooling upgrades specifically need landlord approval before a tenant can go ahead.

If you're renting, raise this with your landlord as a bill-reduction opportunity for the property, not just a personal comfort upgrade. That's usually the angle that gets attention.

If you're replacing an existing system, that system must be more than two years old.

This condition applies to the appliance age, not how long you've owned the home.

What actually qualifies

Only high-efficiency reverse-cycle systems that both heat and cool are eligible. Evaporative coolers don't qualify.

Cooling-only split systems don't qualify either, even brand new ones. This catches people who assume any new air conditioner purchase gets a discount.

• Must be listed on the ESC-approved VEU product register
• Must carry a minimum 5-year warranty for residential installs
• Must be a genuine reverse-cycle (heating and cooling) system
• If replacing an existing unit, that unit must be more than 2 years old

These conditions come straight from the government's heating and cooling discount page.

What it roughly means for your wallet

Here's where the tiers matter. Replacing a non-ducted gas room heater with an efficient reverse-cycle system attracts a discount typically up to $1,610.

Bill savings for that tier run up to $460 a year.

Go bigger, and the numbers change. Removing or replacing a ducted, whole-of-home gas heater with reverse-cycle can attract a discount typically up to $5,530.

Bill savings for that larger tier run up to $1,140 a year, according to the same government page.

Now for the part left off a lot of advertising: since 1 February 2025, a mandatory customer co-payment applies to this activity.

It's set out in the ESC's regulatory update, and it applies per product installed if you're upgrading multiple heaters.

Your co-payment will depend on your system size and configuration. Ask your installer to confirm the exact amount for your design before you book, since these figures vary and are subject to regulatory change.

The 30 September 2026 timing question

The change is confirmed in the published VEU Specifications Version 25. Part 6 sets revised minimum co-payments from 30 September 2026.

From that date, all ducted air conditioners and multi-split systems with total rated cooling capacity of at least 10 kW require a minimum $3,000 co-payment including GST. Smaller multi-splits require $1,000.

For other non-ducted air conditioners, the minimum remains $200 below 10 kW and $1,000 at or above 10 kW. Apply the correct eligible activity and installation date.

These are minimum contributions, not complete installed-price guarantees. A project can cost more because of equipment and installation requirements.

Request a written quote that states the intended installation date, applicable activity, minimum contribution and actual amount payable. Ask for an updated quote if the date or system changes.

How to actually get the discount

1. Use an accredited provider, or bring your own installer who partners with one
2. Ask for the VEU discount to appear as a clear line item on your written quote before any work starts
3. Ask your installer what decommissioning the old gas unit involves in your quote, and confirm it's covered in the scope
4. Ask what co-payment applies to your exact system size and configuration on the day you book

One practical note: not every accredited provider offers heating and cooling upgrades at any given time. The scheme is market-based, so providers choose when and where they operate.

If your preferred installer isn't currently active in this activity, ask them to recommend an accredited partner.

Who this isn't right for

If your existing system is under two years old, you won't qualify for the replacement discount tier.

If you're chasing a genuinely free ducted install, that expectation doesn't match how the VEU scheme works. And if you're a tenant without landlord buy-in, this stalls until that conversation happens.

Stepping up to a larger ducted system does add electrical demand, especially at startup.

Whether that's a problem for your home depends on your current switchboard capacity, which is worth checking with an installer before you commit to a bigger system. I've covered the detail on why older homes can have this constraint in our piece on why Aussie houses weren't designed for full electrification.

Luke's honest take

For a gas ducted heater that's old and inefficient, the discount can meaningfully shift the financial case for switching to reverse-cycle. As a general principle, the bigger the system you're displacing, the more the numbers tend to favour the switch, both on the upfront discount and the ongoing bill impact.

Don't wait for a deadline that might not even be locked in. But do get a proper design conversation with an installer before you commit to a system size or configuration.

If hot water is on your radar too, that's a separate VEU discount with its own co-payment. I've covered both the numbers and Victoria's gas exit timeline in another piece if you want to see how they stack. And if you're thinking of solar, battery and heating all at once, the electrification piece ties the whole picture together.

Don't chase a deadline you can't confirm. Get a proper written quote showing the discount and co-payment, mention to your installer that you want to confirm your electrical setup can handle the system size, and make the call on your own timeline.