Gillard's proposal pulls troops out of Afghanistan a year earlier than the previous deadline, the Australian Broadcasting Corp. reported.
"This is a war with a purpose. This is a war with an end. We have a strategy, a mission and a time frame for achieving it," Gillard said.
The prime minister added a small group of Australian forces may stay in Afghanistan to train Afghan troops.
"Australia will also be prepared to provide niche training to the Afghan National Security Forces after 2014. In future we will support the proposed [United Kingdom]-led Afghan National Army Officer Academy," she said. "We will maintain a role providing training and support to policing in Afghanistan and, finally, as I have stated previously, we are prepared to consider a limited Special Forces contribution in the right circumstances and under the right mandate."
Opposition party members said the sooner troops are home, the better.
"The war in Afghanistan has been a failure on just about every level and from the Greens' point of view it is time we brought the troops home safely and we would like to see that withdrawal from Afghanistan start straight away, providing it can be done in a safe and well managed way," said Greens party leader Christine Milne.