Reverse Cycle vs Gas Heating: The Winter 2026 Maths

If you have gas ducted heating and it is getting old, you are probably weighing up whether to replace it with another gas unit or switch to reverse cycle. The running cost case is straightforward. The upfront cost case is not, because Victoria has a $5,530 rebate and most other states have nothing.

I ran every state through the gas to electric heating calculator. Here is what came out.

How the two systems compare

A gas ducted heater burns natural gas in a furnace and pushes warm air through ducts. Modern units run at about 75% thermal efficiency. About a quarter of the gas you pay for is lost up the flue or in duct losses before any heat reaches a room.

A reverse cycle air conditioner does not generate heat. It moves heat from outside air into the house, in the same way a fridge moves heat out of your food. For every unit of electricity it uses, it delivers 3 to 4.5 units of heat. The ratio is called the coefficient of performance (COP), and it falls when the outside air is colder.

Even at the worst-case cool climate COP of 3.0, a reverse cycle system uses about 60% less energy than gas to deliver the same warmth. The catch is that gas is also cheaper per unit of energy than electricity in most states, so the cost gap is smaller than the efficiency gap suggests.

What it costs to switch

A ducted reverse cycle system, or a couple of split units sized to cover a whole house, costs about $10,000 installed. What you actually pay depends almost entirely on which state you live in.

• Victoria has the most generous heating rebate in the country. The Victorian Energy Upgrades (VEU) program pays up to $5,530 for a ducted-gas-to-ducted-reverse-cycle replacement. The separate $1,000 Home Heating and Cooling Upgrades rebate you may still see advertised closed in December 2022.
• NSW offers around $1,000 through the Energy Savings Scheme heating replacement category.
• South Australia offers about $500 through the Retailer Energy Productivity Scheme (REPS).
• Queensland, Western Australia, Tasmania, ACT have no state-specific reverse cycle rebate, and federal STCs do not cover space heating systems. You pay the full $10,000 and claim nothing back.

The rebate, more than the climate, is what drives the state-by-state payback differences below.

The numbers for every state

Here is how a gas-to-reverse-cycle heating switch looks in each major city, for a 3-bedroom home with existing gas central heating. These figures come from the calculator using current 2026 energy rates and rebates.

Net cost = $10,000 reverse cycle install minus state rebates and ACT loan-interest savings. Year 1 saving is annual gas usage avoided minus electricity used at state COP and tariffs. Undiscounted simple payback. Excludes the gas supply charge saving (covered in the next section). 3-bed home, all appliances at end-of-life. The linked /examples/<state>/ pages show NPV-based payback that may differ slightly because of gas escalation, sequence position, and discount-rate effects.

Why Victoria is the standout

Victoria has the cold winters, the high heating load (about 38,000 MJ of gas a year, more than two and a half times Sydney), and a $5,530 rebate. The rebate cuts the real out-of-pocket cost from $10,000 to roughly $4,470, and even at the cool-climate COP of 3.0 the payback comes in at just under nine years.

Tasmania and the ACT have similar heating loads but no comparable rebate. Their numbers still work because the running cost gap between gas and reverse cycle is so large in those climates. The warmer states have the opposite problem. A Brisbane home uses about a fifth of Melbourne's gas heating, so there is barely any running cost to offset $10,000 of equipment in the first place.

Killing the gas connection

The table above only counts heating savings. It leaves out the gas supply charge, which is the daily fixed amount every gas-connected home pays whether they use any gas or not. It ranges from about $91 a year in WA to $307 a year in SA and $303 in Victoria, with most states sitting around $220 to $300. You pay it for the privilege of having the meter, before a single megajoule comes out of the pipe.

That charge only goes away when you have no gas appliances at all. So if your house has gas hot water, gas cooktop, and gas heating, switching just the heating leaves the connection alive and the supply charge intact. But if heating is the last of the three to go, the supply charge dies with it.

In Victoria, that $303 a year added to the heating saving cuts the payback from about 9 years to about 5.5 years. In the ACT, the saving jumps from $705 to $1,008 a year, and payback drops from around 11 years to about 8.

The catch is that you only get the supply charge bonus on the last gas appliance you remove. The calculator's sequence view usually puts hot water and cooktop first, because they are cheaper to switch and pay back faster on running costs alone, and ranks heating last so it picks up the supply charge saving on the way out. More on that in our post on ditching gas entirely.

If you were going to buy AC anyway

A reverse cycle air conditioner is also an air conditioner. If summer cooling is already on the shopping list, the relevant cost is not $10,000. It is the difference between AC sized for cooling and AC sized to also heat the whole house, which is usually $2,000 to $3,000.

Adelaide, Perth, and western Sydney homes that need summer cooling anyway should run the numbers on this basis. The table above assumes you have no existing cooling demand, which is the worst case for the payback maths.

When gas heating still makes sense

• Your gas heater is brand new. If it has 10 to 15 years of life left, ripping it out and binning it is a real cost the calculator does not capture in the simple comparison above. In that case, run the numbers with your appliance age set correctly. It usually pays to wait until the heater fails.
• You are in a freezing climate (alpine NSW, Tasmanian highlands). COPs drop below 2.5 when outside temperatures fall below freezing for extended periods. Modern cold-climate heat pumps handle this, but if you are looking at standard equipment, size up generously and budget for a small backup.
• You only heat one room. If you spend winter in a single living room with a gas log fire and the rest of the house cold, you do not have a ducted heating bill in the first place. A single split system is the right comparison, not a whole-home reverse cycle install.
• You are renting. The economics here assume the owner pays for installation. Renters cannot make this switch unilaterally. A portable reverse cycle is an option but a different value calculation.

What about gas prices going up?

The numbers above use today's gas rates. Australian east coast gas is tied to LNG export markets, so household bills track international commodity moves. The same forces that pushed petrol to $2.50 a litre during the Iran conflict earlier this year apply to gas, just with longer-dated contracts.

There is also a structural problem specific to gas. As more households disconnect, the network operator's fixed costs get spread across fewer remaining customers. Australian Gas Networks (AGIG's Victorian distribution business) submitted a 2025-26 tariff variation to the AER for its Victorian network from July 2025 (see the AER tariff variation notice), and similar uplift pressure is on each Victorian distributor. If gas-side rates keep rising faster than electricity, every payback period in the table shortens further. Victoria's 8.9-year payback could fall to around six years within a few years.

Reverse cycle running off the grid is also exposed to electricity price changes, but if you have solar, the marginal cost of running it during the day is roughly zero. That is something a gas heater can never offer.

Frequently asked questions

How much does a reverse cycle system cost in Australia?

A whole-home ducted reverse cycle install or a multi-split system sized to cover a 3-bedroom home costs about $10,000 fitted. State rebates can reduce this. Victoria's VEU program takes up to $5,530 off a ducted-gas-to-ducted-reverse-cycle replacement, NSW takes about $1,000, SA takes $500. Other states have no heating-specific rebate, and federal STCs do not apply to space heating systems.

Is reverse cycle cheaper to run than gas heating?

Yes, in every state. A reverse cycle system at COP 3.0 (worst case) uses about 60% less energy than gas at 75% efficiency. After adjusting for electricity being more expensive than gas per unit energy, the running cost saving ranges from about $350 a year in Brisbane and Perth (very low heating demand) to over $1,200 a year in Hobart (high heating demand). The biggest swing factor is how much heating you actually do.

Do reverse cycle heat pumps work in cold weather?

Standard reverse cycle units operate at COPs around 3.0 to 3.5 in cool climates like Melbourne and Canberra, where overnight winter temperatures are typically 2 to 8 degrees. They keep working below freezing but efficiency drops. For sustained sub-zero conditions (alpine areas), look for cold-climate-rated equipment, which maintains COP above 2.0 down to about minus 15.

Does reverse cycle pay back faster if I disconnect gas completely?

Significantly faster. Disconnecting gas eliminates the daily supply charge, which is $91 a year in WA, $223 in Tasmania, $245 in NSW, $303 in Victoria and the ACT, and $307 in South Australia. Adding this to the heating cost saving cuts Victoria's payback from about 9 years to about 5.5, and the ACT from around 11 years to about 8. The calculator handles this interaction automatically when it ranks your full upgrade sequence.

Run your own numbers

The figures above are for a typical 3-bedroom home with existing gas ducted heating. Your savings will depend on how much heating you do, your local gas and electricity rates, and which rebates apply in your state. The calculator works out the exact numbers for your postcode and household. It also shows where the heating switch fits in the optimal sequence of all home energy upgrades, including the supply charge bonus when heating is the last gas appliance to go.

Where these numbers come from

Gas usage per state from AER gas monitoring reports (2025-26). Gas rates and electricity rates from Selectra and published retailer tariffs. Reverse cycle COPs by climate zone from Australian Standards (AS/NZS 3823) and manufacturer ratings. Reverse cycle install costs from SolarChoice and installer surveys. State rebate values from Victorian Energy Upgrades, NSW Energy Savings Scheme, and SA Retailer Energy Productivity Scheme published rates. Full data source list on the data sources page.