The 22-year-old Welsford lit up Anna Meares Velodrome at the track nationals on Friday night, holding off Kerby to win the 4km individual pursuit in 4min 14.189sec, 3.92 seconds clear of the Brisbane-based crowd favourite.
Kelland O'Brien, who won bronze in the world championships behind Kerby last year, won the battle for bronze against former Madison and omnium world champion Leigh Howard.
Welsford's team pursuit silver in Rio was one of just two medals for Australia in a disappointing track cycling campaign.
Kerby, who watched those Olympics from the couch and, aware that he was set to lose his road racing contract, thought it was worth another crack.
The Hervey Bay product snuck into the world championship squad with a surprise win in last year's national titles and then chalked up the third-fastest individual pursuit time in history on his way to world championship gold in Hong Kong.
If selected for the Commonwealth Games as expected, the pair will present a strong case for gold and silver in the same event on the same track in April.
And while the individual pursuit isn't raced in the Olympics, Kerby's prowess is seen by Welsford as critical as they chase team gold in 2020.
"He's phenomenal to come back after what he's done on the road straight back on the track ... he's still the master and I'm the apprentice," Welsford said of the 25-year-old.
"The crew we have going forward, we're going to do something special at Commonwealth Games and Tokyo because we have so much depth coming through, even younger guys than me pushing some insane times."
In the women's 3000m individual pursuit Ashlee Ankudinoff (3min 32.335sec) took narrow bragging rights in the final over her Australian Cycling Team mate Amy Cure (3min 32.690sec).
“I came into this race knowing I should ride my own race,” Ankudinoff said,
“Amy rides a very different race to me and she like to start off slow and then build it up, I watched it in the heat against Nettie (Edmondson) and I’m a different style of rider.
“I like to go out do my own thing and just ask for my coach mick to put me on a 31 [seconds per lap] schedule and I just rode off that. I knew it was very close in the end and I gave it my all in the end.
“So to come up with just under a second in the lead was awesome."
Dual world and defending champion Rebecca Wiasak was forced to the bronze medal ride where she took the win in a time of 3min 34.616sec over Georgia Baker (3min 40.616sec).
Earlier, Kaarle McCulloch took the bragging rights against team sprint partner Stephanie Morton, winning the time trial in the third-quickest time of her career.
The three-time world champion clocked 34.064sec over 500m to beat Morton (34.281sec), who won the silver four years ago in Glasgow.
The pair were more than half-a-second quicker than the rest of the field.
McCulloch won silver in Thursday's team sprint, with the time trial victory the 30-year-old's 13th national crown.
“To be able to execute as well as what I did, and in the time that I did, I am really excited," she said. "I am so buggered right now, to go that fast, on this track especially, it really has given me a lot of confidence.
“I was really nervous going up against Steph, I get to train with her every day now and she is mashing me in training every day."
Defending champion Breanna Hargrave took the bronze in a time of 34.856sec.
In the under 19 women’s time trial, a personal best to Brooklyn Vonderwall (35.727sec) saw her win gold ahead of Victoria’s Alana Field (35.829) and South Australia’s Heather May (36.813sec).