Diggers could begin handing control of parts of the Afghan province of Oruzgan to local troops within two or three months as Australia winds down operations in the country.
But the Government has committed Australia to involvement in Afghanistan for many years yet, pledging special forces troops and hundreds of millions in cash to support Afghan security forces.
In a major speech today, Prime Minister Julia Gillard will say President Hamid Karzai is about to announce that local troops will begin taking responsibility for security in parts of Oruzgan.
The Australian military and aid effort in Afghanistan is centred on Oruzgan, with almost 1500 Diggers based in the dangerous southern province.
A day after an 18-hour Taliban assault on Kabul was contained, Ms Gillard will say the so-called transition process for selected areas of Oruzgan should take 12 to 18 months, meaning Australian forces should have quit frontline areas by 2014.
"When this is complete, Australia's commitment in Afghanistan will look very different to what we have today," Ms Gillard will say.
"We will no longer be conducting routine frontline operations with the Afghan National Security Forces. The Australian-led provincial reconstruction team will have completed its work and most of our troops will have returned home."
Ms Gillard's confirmation of Australia's transition process comes before a vital meeting in Chicago next month when allied countries will finalise the plan to hand the security lead to Afghan forces.
But the US will also push partner nations at the summit, such as Australia, for billions in future funding for Afghan security forces.
In her speech to the Australian Strategic Policy Institute in Canberra, Ms Gillard will hint that Australia will donate significant long-term funding to the Afghan army and national police. She will also underline again Australia's preparedness to station SAS and commandos in Afghanistan long after 2014.
Australia's special forces contingent is based in Oruzgan, but under plans being considered, they could be shifted south to Kandahar or north to Kabul.
Ms Gillard will argue that Afghan forces are increasingly competent but many experts say Afghan units and police are still of a low standard.