The young defender will become a Cherries player on Wednesday.
The 22-year-old left-back appeared to have broken into the club's first-team plans under Jurgen Klopp last term, and after signing a new long-term contract in November he went on to make 10 appearances in all competitions, scoring once.
The Australian international was touted by some Reds fans as the long-term solution to the club's left-back problem, but it now appears that he is set to complete a somewhat surprising permanent exit.
It had been widely reported earlier this week that Smith would move to Bournemouth in a £6 million deal, and whilst that deal looks likely to be confirmed imminently it appears the details of the move are not as suggested.
Smith is flying back from the Reds' pre-season tour of the USA to undergo a medical with the Cherries ahead of completing his move on Wednesday, but the Bournemouth Echo claims that the actual fee being paid is only around £3 million - half of the £6 million previously reported.
That news will come as a disappointment to Liverpool fans, who were no doubt hoping to recoup a significant fee for the talented youngster.
Klopp has already allowed young stars Jordon Ibe, Jordan Rossiter, Sergi Canos, Jerome Sinclair, and Joao Carlos Teixeira to leave Anfield this summer as he begins to put his own stamp on the club's squad.
Now, despite his encouraging trajectory last term, it appears as though Smith is set to be the latest highly-rated prospect to be cut loose by the German boss.