NSW Hot Water Rebates 2026: Save $700 - $900 When You Need To Replace Your Hot Water System

When it’s time to get a new hot water system, most Sydney homeowners won’t even realize that they have money lying on the table. Here are three ways to obtain it while the rebates continue to slide downwards.

When a Sydney household owner is thinking of replacing their hot water system, usually the decision is made spontaneously. On Thursday evening the old system stops working, on Friday morning they call a plumber and by Friday afternoon they’ve got a new tank on and the old one on the truck. It makes sense, no one wants to be without hot water for longer than is needed.

But this urgency can cause people to forgo tax rebates which the government applies to the cost of a new system and often amount to $700 to $900. Then, with the federal STC scheme being gradually phased out each year until it expires in 2030, the rebates will be bigger than they will be next year or the year after.

There Are Actually 2 Rebates That Can Be Stacked

There are two different government incentive schemes that are available for hot water system upgrades in NSW, and you can access both schemes for the same system upgrade.

The Federal Small-scale Technology Certificates (STCs) allow homeowners to obtain tax credits for installing small-scale renewable power generation systems.

Any heat pump or solar hot water system installed in Australia is eligible to receive STCs and the number is determined by the efficiency rating of the system and location of the system. These certificates come with a dollar value and your installer will subtract that from the total install price. You never touch the certificates themselves, it is simply a discount on your quote.

Based on the figures from the STC zone in Sydney, a typical 200 litre heat pump system earns about 24 certificates in 2026 for an approximate price of $36 per certificate ($860 less hardware). Again the cost will depend on the system model and zone in which the system is being installed but $700 to $900 is a good value for most of the systems in the Sydney area.

Important – the STC scheme is a scheme that is meant to be phased down. The number of certificates offered decreases over the years and the scheme will completely cease in 2030. What this translates to is that the amount of rebate you’ll receive in 2026 is greater than in 2027, which is greater than in 2028, and so on. If you need to replace your system in the next, say 2 years, getting the replacement done sooner will allow you to collect a larger rebate.

NSW Energy Savings Scheme (ESS)

The NSW Government’s Energy Savings Scheme offers a further up-front discount, along with an eligible heat pump or solar hot water system if choosing to replace an existing electric or gas hot water system. Again, the discount is subtracted from your installer’s quote – you don’t have to deal with the paperwork.

Enhanced rebates available under ESS at this time ($640 when replacing electric storage system with a heat pump, and $330 when replacing a gas system). The amount varies depending on the energy savings provided by the new system relative to the old system – the greater the savings, the greater the rebate.

Rebate	Amount	Applied
Federal STCs	~$860 (approx. 24 certificates at ~$36 each)	Deducted from installer quote at point of sale
NSW ESS, replacing electric with heat pump	Up to $640	Deducted from installer quote at point of sale
NSW ESS, replacing gas with heat pump	Up to $330	Deducted from installer quote at point of sale
Combined saving (typical)	$700–$900+	Both schemes stackable on same installation

Rebate Deducted From The Price

With all rebates applied to it, a fully installed mid-range heat pump hot water system in NSW will cost you between $3,000 and $5,000 out of your pocket. About $4,815 is the national average in NSW (excluding federal STCs, but including the NSW state ESS rebate). After applying the ESS rebate, the net cost comes even lower, especially if it’s a standard residential installation costing around $3,500 – $4,200.

That’s compared to running cost savings. The annual operating expense of a conventional electric storage tank is about $500 to $700 per year. The same size heat pump ranges from $75 a year to $300 a year, depending on the electricity rate, the use and ownership of solar panels. The NSW Government’s own case study showcases the savings a homeowner can achieve by replacing a gas hot water system, which costs $600 per year, with a heat pump, which costs the homeowner $75 per year.

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Installations of hot water heaters using heat-pumps rose about 70% across the country last year.  It is now a financially attractive change for the majority of households living in Sydney with its mixture of high energy prices, larger rebates from the Government and enhanced technology for heat pumps. Typically, the payback period for the extra upfront cost is between 3 years and 7 years after which you save $400 to $600 each year for the remainder of the system’s life.

Claiming Process And How To Claim Step-Wise.

Step 1: Get quotes from licensed installers. Ensure they are approved to offer the ESS discount and do the paperwork for the STC. Both rebates need to be put on your quote where they show up as deductions and not reimbursements afterward.

Step 2: Before installation, your installer will give you a nomination sheet to fill in for the ESS scheme. This will need to be signed and returned prior to the commencement of work. First install, then claim will not count for rebate.

Step 3: Installer creates STC and deals with the ESS certificate process. There is no need to sign up anywhere, fill out an application and paperwork with the government. Installer’s quote always includes the rebates.

Step 4: Installation happens. It is installed, commissioned and guaranteed by a licensed plumber and a compliance certificate is issued for any gas or electrical work carried out.

Eligibility: Who Qualifies?

No property value limits – No income test- any Australian business or home owner installing an eligible system is eligible for the STCs. NSW’s Electric Hot Waterable Rebate has similar criteria: “The rebate is available in NSW, if you are replacing an existing electric or gas hot water system with an ESS that is eligible for rebate, and it is done so through an accredited ESS installer.

It is important to know that the system you are installing is one of the Clean Energy Regulator’s approved model systems. The list includes most of the major brands that are available in Australia, including Rheem, Stiebel Eltron, Reclaim, iStore and Chromagen. Your installer will be able to verify if the model you’re enquiring is eligible or not.

Eligibility checklist:

• Located in NSW
• Replacing an existing electric or gas hot water system
• Installing an eligible heat pump or solar system
• Work carried out by an accredited installer
• System model on the Clean Energy Regulator’s approved list
• ESS nomination form signed before installation begins

Avoid One Mistake

Do NOT place first and attempt to claim afterwards. Please fill out the ESS nomination form prior to installation. If you require an instant replacement for your old system and it goes out of whack, then you need to be telling your installer that you wish to have ESS discount before they get started. A good installer should put out paperwork on the same day and start at once it is signed. It takes about 30 minutes and will save you hundreds of dollars!

Consider replacing your hot water area if it is nearing the end of its useful life and you know it will need to be replaced within the next year or two – do this now when rebates are the best. The federal STC scheme has a step down every year until 2030. The rebate for 2026 is the highest it will ever be again. Delay Beyond Cost: You lose rebates, and the energy use of your existing, suboptimal heater adds expenses.