Figures released by the Clean Energy Regulator show that there was more than 1057 megawatts of capacity installed last year, mostly from rooftop solar, beating the previous record of 1035 megawatts set in 2012.
This brings the total installed small-scale capacity in Australia to more than 6000 megawatts.
In 2017, there was a 41 per cent increase in installed renewable energy capacity across all states and territories compared to 2016. Queensland led the way with installed capacity at 295 megawatts, with the Australian Capital Territory taking top place for biggest annual increase, up 57 per cent.
The report shows there was also a preference for larger capacity systems in 2017 as reducing costs made these more attractive. The average solar system capacity has doubled in the five years since 2012, from three to six kilowatts.
The Clean Energy Regulator predicts 2018 will see at least another 1000 megawatts of capacity added to Australian rooftops.
The Small-scale Renewable Energy Scheme provides financial incentives for households and businesses to install renewable energy systems to reduce their reliance on the electricity grid and reduce their emissions.
Earlier this year, the Clean Energy Regulator announced the Renewable Energy Target will be met thanks to more than $12 billion of investment in large-scale projects.