For many Australian households, heating is a significant winter expense. In 2026, understanding the running costs of natural gas, LPG, and how they compare to electric alternatives like reverse cycle air conditioning is crucial for managing your energy budget. The direct answer is that efficient reverse cycle air conditioning remains the cheapest way to heat your home, often costing less than half that of natural gas heating per hour, and significantly less than LPG or electric element heaters.
While natural gas remains a popular choice for its consistent warmth, rising wholesale gas costs and varying retail tariffs mean its perceived affordability is being challenged, particularly by highly efficient heat pumps. LPG, while offering flexibility for homes without mains gas, consistently ranks as the most expensive fuel source for heating.
Understanding Energy Units: MJ vs. kWh
To accurately compare heating costs, it’s essential to understand the units of energy measurement:
- Megajoules (MJ): Natural gas and LPG are typically measured and billed in megajoules. A higher MJ/hour rating on an appliance indicates greater energy consumption.
- Kilowatt-hours (kWh): Electricity is measured and billed in kilowatt-hours. Electrical appliances list their power consumption in kilowatts (kW).
For direct comparison, 1 kWh of heat output is approximately equivalent to 3.6 MJ of gas use at 100% efficiency. This conversion helps in calculating equivalent costs.
Natural Gas Heating Costs 2026
Ducted natural gas heating systems are common in many Australian homes, particularly in cooler southern states. While initial installation costs range from $3,000 to $10,000 for a complete system, the ongoing running costs are what impact your winter bills.
Average Natural Gas Prices (Usage & Supply) – June 2026:
| State | Average Usage Rate (c/MJ) | Average Daily Supply Charge ($/day) | Equivalent Usage Rate (c/kWh) | Average Annual Bill (Heating, Hot Water, Cooking) |
|---|---|---|---|---|
| Queensland | 2.45c | $0.80 | 8.82c | $1,090 |
| Victoria | 2.58c | $0.84 | 9.29c | $1,240 |
| New South Wales | 2.72c | $0.88 | 9.79c | $1,320 |
| South Australia | 3.05c | $0.96 | 10.98c | $1,480 |
Note: These are average figures. Actual rates vary significantly by retailer, plan type (standing vs. market offer), and distribution network. Usage rates often decrease with higher consumption due to block tariffs.
Running Costs for Ducted Natural Gas Heaters: A modern, efficient ducted gas heater, such as a Braemar 6-star equivalent system, might consume between 20-36 MJ per hour. Based on a NSW average usage rate of 2.72c/MJ, this translates to:
- Low-end (20 MJ/hr): 20 MJ/hr * $0.0272/MJ = $0.54 per hour
- High-end (36 MJ/hr): 36 MJ/hr * $0.0272/MJ = $0.98 per hour
In Melbourne, a ducted gas heater running for 8 hours a day could cost between $4.50 and $8.00 per day, leading to annual costs from $1,540 for a 6-star unit in a small home to over $3,000 for larger homes with heavy usage.
LPG Heating Costs 2026
LPG (Liquefied Petroleum Gas) is typically used in areas without access to the natural gas network, supplied in 45kg cylinders. While offering flexibility, it generally comes at a higher cost per unit of energy.
Average LPG Bottle Prices (45kg) – July 2026:
- Typical refill price: AUD $120 – $170 per 45kg bottle, depending on location, supplier, and delivery costs.
- Introductory offers: Some suppliers offer first bottles around $75.
- Annual bottle rental: Expect $30 – $55 per bottle per year.
Each 45kg LPG bottle contains approximately 2200 MJ of energy. To calculate the effective cost per MJ:
- At $145 per bottle (mid-range): $145 / 2200 MJ = $0.0659 per MJ (or 6.59c/MJ)
This is significantly higher than natural gas rates.
Running Costs for Portable LPG Heaters: Portable unflued LPG heaters are common. A typical model consuming 5-9 MJ per hour would cost:
- Low-end (5 MJ/hr): 5 MJ/hr * $0.0659/MJ = $0.33 per hour
- High-end (9 MJ/hr): 9 MJ/hr * $0.0659/MJ = $0.59 per hour
While per-hour costs for portable LPG heaters can appear lower than ducted natural gas due to smaller output, they heat a smaller area and are less efficient for whole-home heating. Portable unflued gas heaters also release moisture and combustion by-products indoors, requiring adequate ventilation.
Efficiency Comparison: Gas vs. Electric & Reverse Cycle 2026
When comparing heating options, efficiency is paramount. The Energy Rating Label provides star ratings, with more stars indicating lower running costs. For gas heaters, the maximum official star rating is 6, though some models like Braemar’s achieve a “7-star equivalent” efficiency.
Each additional star on an energy rating can reduce running costs by approximately 10%.
| Heater Type | Typical Consumption (Input) | Indicative Running Cost per Hour (VIC, 2026) | Efficiency (COP/Star Rating) | Notes |
|---|---|---|---|---|
| Reverse Cycle Split System | 1-2.5 kW electricity | $0.20 – $0.90 | COP 3-6 (300-600%) | Cheapest to run. Moves heat, doesn’t generate it. Can heat and cool. Highly efficient for zonal heating. Annual costs for winter heating can be as low as $119 in NSW for a living room. |
| Ducted Natural Gas | 20-36 MJ/hour gas | $0.56 – $1.01 | 85-95% (3-6+ stars) | Effective for whole-home heating. Requires gas connection. Less efficient than reverse cycle per unit of heat delivered. |
| Portable LPG Heater | 5-9 MJ/hour LPG | $0.50 – $0.90 | ~90% (unflued) | Higher fuel cost than natural gas. Heats smaller areas. Unflued models release moisture/by-products, requiring ventilation. |
| Electric Panel/Oil Column | 1-2.4 kW electricity | $0.35 – $0.84 | 100% | Direct electric resistance heating. Inefficient for primary heating compared to reverse cycle. Best for occasional, targeted use. |
“Heater running costs in Australia vary widely by type: a reverse-cycle split system costs $0.25–$0.45/hour, ducted gas heating runs $0.50–$0.80/hour, and electric panel heaters cost $0.50–$0.99/hour.”
As the table illustrates, a reverse cycle air conditioner (heat pump) is unequivocally the most energy-efficient and cheapest option for heating in Australia. It works by transferring heat rather than generating it, allowing it to deliver multiple units of heat for every unit of electricity consumed (Coefficient of Performance, or COP, of 3-6).
Australian Energy Rebates & Concessions 2026
The universal Federal Energy Bill Relief Fund ended on 31 December 2025, meaning no automatic federal credits are applied to bills in 2026. However, state and territory-specific concessions and rebates remain available for eligible households, particularly those with concession cards or low incomes.
- New South Wales: The Low Income Household Rebate offers up to $285 per year. The Family Energy Rebate provides up to $180 per year, and the Seniors Energy Rebate offers $200 per year. These are applied to electricity bills and can assist with overall energy costs.
- Victoria: The Annual Electricity Concession provides a 17.5% discount on electricity usage and service costs (after the first $171.60). For those without mains gas, the Non-Mains Energy Concession offers $57-$650 per year for LPG or firewood. The Victorian Energy Upgrades (VEU) program offers significant point-of-sale discounts for replacing old ducted gas heating with high-efficiency reverse cycle systems, potentially worth up to $5,500+ off the installation price. Learn more about available support in our guide: Australian Energy Rebates in 2026: Your State-by-State Guide After Federal Relief Ends.
- Queensland: Eligible households can claim the Electricity Rebate, providing $386.34 per year.
- South Australia: The Energy Bill Concession and Cost of Living Concession provide support, with the energy concession increasing to up to $291.27 annually from 1 July 2026.
- ACT: The Electricity, Gas and Water Rebate (formerly Utilities Concession) is set at $800 per year for 2025-26.
It’s crucial to check your state government’s energy department or Service NSW/Victoria/Queensland websites for the most up-to-date eligibility criteria and application processes. You may also find assistance through retailer hardship programs.
Practical Steps to Reduce Heating Costs
Regardless of your heating type, several strategies can significantly reduce your winter energy bills:
- Optimise Thermostat Settings: The Australian government recommends setting your heating between 18°C and 20°C in winter. Every degree above 20°C can add 5% to 10% to your energy costs.
- Zone Your Heating: If you have ducted gas heating, use zoning capabilities to only heat the rooms you are using. This prevents wasted energy on unoccupied areas.
- Improve Home Insulation & Draught Proofing: A well-insulated home retains heat more effectively. Seal gaps around windows, doors, and floorboards. Explore state-based rebates for insulation upgrades; for example, Victorian homes can receive $500–$1,200 off ceiling insulation installation through the VEU program. For more detailed advice, see our guide: Unlock $1,500+ Winter Savings: Your 2026 Australian Insulation & Draught Proofing Rebate Guide.
- Regular Maintenance: Ensure your heating system is serviced annually. A well-maintained unit runs more efficiently and can prevent costly breakdowns.
- Compare Energy Plans: Gas and electricity tariffs vary significantly between retailers. Use government-supported comparison websites like Energy Made Easy to compare market offers against default offers (like the Victorian Default Offer, which saw average annual bill reductions of 5% for domestic customers from 1 July 2026). Switching providers can save hundreds of dollars annually. For more, read: Choosing Your Australian Energy Provider in 2026: A Definitive Guide.
- Consider Reverse Cycle: If your current gas heater is old or inefficient, consider replacing it with a high-efficiency reverse cycle air conditioner. The long-term running cost savings often outweigh the upfront investment, especially with available state rebates.
Bottom Line
In 2026, the cost of gas heating in Australia varies significantly by fuel type, appliance efficiency, and state. While natural gas offers comfortable whole-home heating, its running costs are notably higher than modern reverse cycle air conditioning. LPG remains the most expensive option for primary heating. For most Australian households looking to minimise winter energy bills, investing in a high-efficiency reverse cycle air conditioner, combined with strategic usage and robust home insulation, offers the most significant savings potential, often slashing heating costs by up to $800 annually compared to older gas systems or electric resistance heaters. Actively comparing energy plans and utilising available state rebates are also critical steps to keeping your energy spend in check this winter.