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The volume and complexity of client work for law firms advising small-to-medium enterprises (SMEs) is set to surge over the medium term following the suite of planned tax changes and small-business reforms announced in the 2026–27 federal budget, writes legalsuper.
While the budget measures are still subject to being debated and passed in Parliament, law firms should expect a sharp increase in demand from SME clients.
This will likely involve tax-related advice, trust and business restructuring advice, and advice covering revisions to family wills and estates.
Furthermore, law firms should expect a spike in legal work related to property transactions and business asset purchases and sales.
Below is a breakdown of key measures announced in the budget and their potential implications for law firms with SME clients.
Changes to discretionary trusts
The Albanese government announced it will apply a minimum 30 per cent tax rate to discretionary trust distributions from 1 July 2028 – a move that is designed to curb income‑splitting between trust beneficiaries on different marginal tax rates.
As part of this, the government will provide three-year rollover relief from 1 July 2027 to enable those currently using discretionary trusts who want to avoid adverse tax consequences to switch to alternative ownership structures that will be excluded from the budget measure.
Other types of trusts, such as complying superannuation funds, fixed and widely held trusts, special disability trusts, deceased estates, and charitable trusts, will be excluded from the new 30 per cent minimum tax rate.
This area is expected to be one of the biggest drivers of work for legal firms with SME clients.
In particular, SMEs using a discretionary trust will most likely need a legal review of their trust deed and advice on potentially changing to other types of business and/or trust structures.
Such moves would require legal work around the creation of new documentation, capital gains tax planning and assistance with asset transfers, among other things.
Changes to capital gains tax and negative gearing
The government announced it will discontinue the current 50 per cent capital gains tax (CGT) discount on any assets held for more than 12 months from 1 July 2027. The discount will be replaced with an annual inflation-adjusted indexation rate calculated on the value of the assets held, while a new 30 per cent minimum capital gains tax rate will be applied when assets are sold.
In addition, the government announced that from 1 July 2027, negative gearing will be limited to newly constructed residential investment properties only. Established residential investment properties purchased after the budget announcement on 12 May 2026 will only be able to be negatively geared until 1 July 2027, while residential investment properties owned prior to 12 May 2026 will be grandfathered.
Both the CGT and negative gearing changes are likely to lead to a sharp increase in demand for legal advice around tax, investment portfolio restructuring and estate planning. An expected surge in investment property sales related to the planned negative gearing change will also increase demand for property conveyancing work.
Law firms may also see an increase in disputes and Australian Taxation Office review activity as the new tax rules take shape.
Instant asset write-offs for SMEs
Not all budget measures tighten the screws. The government has proposed a permanent $20,000 instant asset write‑off for businesses under $10 million turnover, along with a reinstated loss carry back for companies under $1 billion turnover from 1 July 2026. Start‑ups may gain access to refundable tax offsets from 1 July 2028.
These measures, set out in the small‑business support section of the budget papers, are likely to improve cash flow for incorporated SMEs and may prompt some clients to reconsider their business structures.
Law firms advising early‑stage companies could see increased demand for guidance on eligibility, tax implications, and compliance obligations.
How should SME law firms respond?
For SME law firms, the 2026–27 budget is likely to generate a substantial increase in demand for high‑value legal advisory work.
The announced changes will benefit boutique SME firms specialising in areas such as tax planning, trust deed reviews, corporate restructures, asset protection and estate planning advice.
SME law firms will need to prepare for the changes ahead, and the expected surge in advisory, restructuring and compliance work, by ensuring they have sufficient internal resources and robust workflow systems in place.
Legalsuper is an industry super fund dedicated to Australian legal professionals.
