Hot Water System
Many buyers pick these systems.
Wonder why?
Instant hot water heater systems, also known as tankless water heaters or continuous flow systems, are increasingly popular in Australian homes and businesses as they offer instant hot water, space savings, and endless hot water delivery without the need for a bulky tank. That demand is no surprise: we all hate the moment the hot tap runs cold!
But what many are not aware of is the fact that, despite their benefits, most instant hot water heater setups don’t qualify for Victorian Energy Upgrades rebates. As a result, many homeowners and businesses miss out on massive rebates. In this blog, we’ll unpack the eligibility rules you must follow, model selection, and installation method, so your instant hot water heater can be rebated.
What Is an Instant Hot Water Heater?
An instant hot water heater is a tankless water heater that heats water as it flows through the heat exchanger rather than storing it in a storage tank. In systems like electric instant hot water heater or a gas continuous flow hot water system, the water is heated on demand, delivering hot water at a set temperature control without constant standby energy use.
Benefits include zero hot water storage, no running out of hot water, a smaller carbon footprint, and more energy savings. That’s why more owners are replacing tank water heater models with tankless models.
The Victorian Rebate Framework for Hot Water Systems
The Victorian Energy Upgrades (VEU) program offers discounts (rebates) for installing certain types of energy-efficient hot water systems. Eligible installs include:
- Heat pump water heater installation (air-source systems)
- Solar hot water upgrades with electric boosters
The VEU does not cover instant hot water heater installations unless they are part of a larger eligible system, such as a balance of system in a heat pump upgrade (like if you’re upgrading to a whole heat pump system and the instant heater is just one small part of the full package. Then it’s okay). That’s the critical rule many miss.
The VEU Registry Overhaul
As of 3 June 2025, the VEU Registry transitioned to a new Salesforce-based system to better serve the growing demand and industry needs. This upgrade includes streamlined product submissions (particularly important for heat pump and solar systems), improved tracking of accredited installers, and greater transparency to distinguish compliant providers from non-compliant ones.
This update further confirms that instant hot water heater installations, when done as stand-alone units, remain ineligible. Only properly registered heat pump water heater installations or electric boosted solar hot water systems may now be processed and approved for rebates under the new system.
Why the Rule Exists
So why exclude instant hot water heaters? The VEU’s logic is carbon abatement: heat pumps and solar systems typically reduce emissions far more consistently than tankless systems. Instantaneous hot water units may have higher flow rate, but they lack rebate-worthy energy efficiency ratings.
This doesn’t diminish the benefits of tankless water heaters, but it does mean they won’t trigger rebates under VEU despite being energy-saving devices in many contexts.
What Qualifies for Rebates?
To get a rebate with hot water systems, you must:
- Install a VEU-approved heat pump water heater or electric boosted solar system;
- Use it to replace an old electric/gas storage tank water heater.
- Have the job done by an accredited provider, with certified supply and installation.
- Ensure that a licensed plumber and licensed electrician handle plumbing and electrical works properly.
- Complete the decommissioning of your old tank
Your installer will submit a VEEC assignment form and coordinate rebate through the rebate structure.
Common Mistakes That Mean No Rebate
Many people installing a new hot water heater miss out on rebates by making errors like:
- Choosing an instant hot water heater or gas tankless water heater, which aren’t on the VEU product register.
- Hiring trades that only install, but don’t officially “supply and install” via an accredited provider;
- Failing to remove the old tank water heater and document decommissioning.
- Not ensuring the system meets minimum warranty (5 years for heat pumps) or energy efficiency;
Even forgetting paperwork can disqualify your water heater installation from earning VEECs
Electric Instant Heaters vs VEU-Approved Systems
Electric instant hot water heater units may be simple to install and great for hot water on demand, but they don’t meet the energy efficiency threshold and cannot trigger rebates. Contrast that with a heat pump water heater installation, which is VEU-approved and offers up to 75% savings in energy costs.
Hybrid, Tankless, and Efficiency
There are hybrid options which combine a tankless water heater with a storage tank backup, or integrate with a heat pump. These types of hot water system combos can qualify, but only if the installed package meets VEU rules and includes an approved heat pump unit. The heat pump must be listed under 1D(18), 3C, or 44(21) categories.
Flow Rate, Energy Ratings & Instant Delivery
Instant hot water heater systems boast a high flow rate and instant hot water delivery — ideal for businesses needing reliable hot water for kitchens or washrooms. But the traditional rebate hinges on energy-efficient performance compared to tank heaters and must use only heat from the pump or solar.
Energy Savings & ROI
Even without rebates, an instant hot water heater offers savings, up to 30% less energy than tanks. But compare that to heat pump water heater installation, which can slash energy use by up to 75%, and net hundreds in rebates. Over a decade, ROI is significantly stronger.
Choosing the Right System
Ask yourself:
- Want rebates? → Choose a heat pump water heater installation or solar hot water eligible under the VEU program;
- Prefer instant hot water heater? → No rebates, but still get endless hot water, temperature control, and space savings;
- Go hybrid by pairing with heat pump backup; Not sure where to start? It’s best to speak to a trusted provider and understand the updated VEU process inside and out
Energy Efficiency
All systems save energy, but an energy-efficient heat pump offers rebate-qualifying energy savings per VEEC guidelines. Gas tankless water heater units avoid storage tank heat-loss but burn fossil fuels, making them inefficient and less rebate-worthy.
Installation and Maintenance
Ensure your water heater installation includes:
- decommissioning old tank
- proper hot water heater setup
- professional water heater maintenance tips
- pipeline compliance and system commissioning.
Heat pump installations require licensed crews to follow VEU technical guidelines.
Tankless Models + Rebates? Only With Heat Pumps
One notable path is to pair your instant hot water heater with a compliant heat pump water heater installation. The pump handles main heating and earns rebates, while tankless backs it up for peak demand, giving you instant delivery and rebate eligibility.
Gas Continuous Flow & Propane, Natural Gas Tankless Heaters
A gas continuous flow hot water system alone won’t qualify. But if you upgrade that system to a compliant heat pump, you can still claim a rebate for replacement.
Similarly, propane tankless water heaters and other natural gas tankless water heaters don’t qualify independently. They must be replaced by a VEU-approved heat pump to obtain incentives.
Temperature Controls and Flow Rates
Hot water systems listed under the VEU rebates need good temperature control and flow rate. A heat exchanger size guides efficiency. Tankless units deliver instant heat, but not efficiency rebates unless part of a pump-based system.
Final Word
Instant hot water heater systems are brilliant when you want endless hot water and a compact solution. However, if you aim for Victorian Energy Upgrades rebates, the only path is through an approved heat pump water heater installation or electric boosted solar system, not the tankless heater alone.
Don’t miss your rebate by picking the wrong model or installer. Choose trusted providers like Eco Foot, get the paperwork right, and incorporate your heater into a VEU-approved upgrade.
FAQ's
What happens if you install an instant unit?
You won’t receive any VEECs or rebates, and you may fail an audit if it is done under the assumption that it was eligible.
Is an instant hot water heater worth it?
If you’re short on space and want hot water on demand, it’s the best. But just remember, they don’t score you any rebates under the Victorian Energy Upgrades program.
What is the downside of an instant hot water heater?
They’re not eligible for VEU rebates, and the flow rate can dip if multiple taps are running. Also, installation can get pricey if your setup needs upgrades.
Does an instant water heater save electricity?
Yep, they only heat water when you need it—there is no standby energy loss like with tanks. But they still use more power per minute, especially electric models.
Which is better: instant water heater or tank water heater?
Instant units are great for small households or offices. But if you’re after rebates, long-term energy savings, and fewer upgrade headaches, go with a VEU-approved heat pump or tank system.
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