Canberra's Business Paradox: Booming Startups, but Few Scale Up

Capital Brewing co-founder Laurence Kain and Datapod founder Scott Carr describe the benefits and challenges of operating businesses in Canberra, including payroll tax, long service leave regulations, and workforce advantages.

Two Sides of the Coin

Canberra's business landscape presents a striking contradiction: the city boasts a high number of startups, yet also records high business failure rates, with few enterprises growing to employ more than 20 people.

Two local success stories illustrate what's possible—and what's at stake.

Capital Brewing employs over 200 people in Canberra, producing 2 million litres of beer annually for the ACT, NSW, Victoria, and Queensland.

"The best thing about operating in Canberra is local people get behind the local brand... We've got some of the best water in the country for brewing beer."
— Laurence Kain, Capital Brewing co-founder

Datapod designs self-contained, transportable AI data centres for mining companies, leveraging Canberra's deep engineering talent pool.

"We're very well-positioned to be a major beneficiary of the AI revolution... we've got that deep engineering capability."
— Scott Carr, Datapod founder

The Cost of Doing Business

Payroll tax remains a key sticking point for growing businesses in the ACT.

• ACT threshold: $1.75 million
• ACT rate: 6.85% for wages up to $20 million
• NSW rate: 5.45% for comparable wages
• Large businesses (Australia-wide wages >$150 million) face an 8.75% rate

The ACT government has also expanded its portable long service leave scheme to include the hospitality sector. Kain says few workers will actually benefit from the change.

Greg Harford of the Canberra Business Chamber warns of the long-term consequences:

"We should be supporting those large businesses to come here, set up here, and grow here, not encouraging them to put their employees somewhere else."

The Government's Position

Chief Minister Andrew Barr acknowledges the concerns but defends the territory's competitive advantages:

"We're not going to be producing millions of $5 trinkets but we do produce hundreds of multi-million dollar items and exports."

Barr argues that the benefits of a Canberra location—including a skilled workforce, proximity to the federal government, and renewable electricity—outweigh the higher payroll tax rates.

The Bottom Line

For now, Canberra remains a city where small businesses flourish, but the leap to larger-scale operations comes with significant hurdles. The question facing policymakers is whether the current tax structure supports or stifles the next generation of homegrown success stories.