Most Significant Impacts of AI Yet to Come for Australian Law Firms and Their Clients

AUGUSTA, Ga. (June 2, 2026) – AI has fundamentally challenged the traditional ‘time equals value’ model of Australian law firms, yet the biggest impacts are still ahead for both firms and their clients, according to the third edition of the Best Law Firms™ Australia Legal Market Report, released today by Best Lawyers^®.

The report, which drew on responses from more than half of all private law firms in Australia with more than 10 lawyers, found 72% of firms reported that their use of generative AI had had no impact on billing practices, raising the question of whether AI-driven savings are yet being captured or shared with clients.

Disclosure to clients also varied sharply by firm size, with 91% of large firms actively communicating AI use compared to 50% of midsize firms and 41% of small firms, revealing an industry split on how to openly position its AI integration.

Best Lawyers CEO Phillip Greer said the findings exposed a profession at the start of a structural shift in how it prices and explains the value of its capability, with AI only just starting to decouple the cost of legal services from the time required to deliver them.

“The billable hour has worked for a century because time was a reasonable proxy for value – AI is the first technology that meaningfully breaks that proxy,” Greer said.

The report also found that among the 15% of firms that had reduced billable hours through AI, 65% of them openly communicated their AI use to clients.

“The disclosure question isn’t really about disclosure, it’s about whether firms will communicate their AI use as a value-add or a normal administrative process, like any other piece of software,” Greer added. “The legal profession is actively working out whether AI is a competitive advantage worth marketing or a risk best kept quiet, and that choice will shape how clients perceive legal value for decades to come.”

Firm size no longer the winning strategy in Australian legal

The Australian Legal Market Report also pointed to a market where the economics of scale are weakening, with small firms outpacing large firms on revenue per lawyer by 7%, despite more than 60% of small firms operating without a documented marketing or business development plan.

Best Lawyers Senior Vice President of Research and Product Strategy Elizabeth Petit said the finding challenged a long-held assumption of consolidation logic, where scale used to equal leverage and profitability.

“Smaller, focused firms are extracting more revenue per lawyer than firms many times their size, creating a genuine case for value over volume in how legal businesses are structured,” Petit said.

“Large firms still hold the advantage on equity partner leverage, but as AI flattens the resource advantage that scale used to provide, the ‘bigger is better’ argument gets harder to make on a revenue per lawyer basis,” she added.

The report also found 95% of firms now cite deep specialization as their primary differentiator, revealing that most firms’ point of difference is now a near-universal industry standard.

The finding follows the release of the third edition of Best Law Firms™ – Australia last month, which recognized 118 firms for the first time – an expansion that reflects the growing breadth of specialization across the Australian legal market.

“Specialization has become the price of entry, not the differentiator, for most law firms in the country. To truly succeed in this market, the next differentiation conversation will have to be about how firms engage clients, how they price, and how they use technology to deliver value clients can see,” Petit said.

The third edition of the Best Law Firms™ Australia Legal Market Report drew on responses from 211 law firms employing nearly 11,000 lawyers across Australia – more than 10% of the total lawyer population – and included financial performance and AI-focused insights for the first time.

Read the full Best Law Firms™ Australia Legal Market Report 2027 Edition here.