Melbourne, Victoria — 28 August 2026 — Victoria’s Victorian Energy Upgrades (VEU) program will introduce revised requirements for ducted reverse-cycle air conditioners from 30 September 2026, following a review of the program’s space heating and cooling activities.
Under the revised arrangements, a minimum customer co-payment of $3,000, including GST, will apply to all ducted reverse-cycle air conditioner installations and to multi-split reverse-cycle air conditioners with a cooling capacity of 10 kilowatts or more. The changes are included in the updated VEU Specifications and follow consultation with industry and other stakeholders.
The Victorian Government’s review examined how the VEU program supports heating and cooling upgrades and whether existing incentive settings accurately reflect the energy and emissions savings delivered by different systems. Stakeholder feedback identified concerns about the sizing of some reverse-cycle air-conditioning systems and the relationship between system capacity and available incentives.
The revised requirements will also introduce changes to incentive calculations for multi-split reverse-cycle air conditioners. Systems with a cooling capacity below 10 kilowatts will retain a minimum co-payment of $1,000, including GST, while systems at or above 10 kilowatts will be subject to the higher $3,000 minimum co-payment.
The VEU Specifications Version 25.0 came into effect on 21 July 2026, with the revised incentive calculations and minimum co-payment changes applying from 30 September 2026. The updated specifications form part of the program’s ongoing review of space heating and cooling activities.
The changes are intended to improve the relationship between system design, energy efficiency and the incentives provided through the VEU program. The Department of Energy, Environment and Climate Action said stakeholder submissions strongly supported improvements to reverse-cycle air-conditioner system design and sizing. The department will monitor the effect of the changes and is considering additional measures to improve system sizing practices.
A further consultation paper is expected later in 2026 as the department considers additional changes to the space heating and cooling activity. The review is part of broader efforts to ensure that VEU incentives deliver energy and emissions savings that are consistent with the objectives of the program.
Reverse-cycle air conditioning remains an eligible technology under the VEU program. Current government information states that eligible Victorian households can receive discounts when replacing qualifying heating systems with efficient reverse-cycle air conditioners. For households replacing an existing ducted gas heater, current indicative discounts can reach up to $5,530, depending on the system and eligibility requirements.
Ducted reverse-cycle systems provide heating and cooling to multiple areas of a property through a central outdoor unit and connected ductwork. Government guidance notes that system selection should take account of the characteristics of the property and that eligible products must meet VEU requirements.
The revised VEU requirements will take effect on 30 September 2026, marking a significant update to Victoria’s approach to incentives for ducted and multi-split reverse-cycle air-conditioning installations.
