Smith, who is second in the FedEx standings and one of the favourites to land the $18 million (£14.9 million) title, could heap major embarrassment on the Professional Golfers' Association if he secures the biggest cheque in golf before announcing his defection.
Telegraph Sport revealed immediately after the 28-year-old's Open title at the "Home of Golf" that Norman was keen to build an all-Australian team.
Australian golfer Cameron Percy appeared on Australian network RSN Radio via telephone on Monday, suggesting Smith and Marc Leishman were on their way to Liv.
"Unfortunate, yeah, they're gone," Percy told RSN.
He has since elaborated on the comment, telling Australian Golf Digest: "Look, I was just conveying what was said in the locker room during the many rain delays we've had on tour the past few weeks."
The Telegraph, however, has subsequently learnt that the deal, as far as Smith is concerned, is done. He is certain to play in the FedEx as the PGA Tour has so far waited until the players actually hit a ball in Liv until it has banned them.
The Tour's policy in throwing out players was being put to the test in court in California last night, with Talor Gooch, Matt Jones and Hudson Swafford launching efforts to overturn their suspensions.
Smith, who has already claimed $3.6 million for winning the Players Championship this year, will join the other rebels for the first time at the Liv Invitational in Boston from Sept 2.
Sources said he had already agreed in principle before the Open for about US$100 million, "but his fee will have gone up". Liv supremo Norman had been the last Australian to lift the Claret Jug, in 1993, before Smith, who has previously said it was "not good" to be asked about the breakaway.
"My team around me worries about all that stuff," he said at St Andrews.
"I'm here to win golf tournaments."
The Smith deal will be announced as Liv primes itself to announce that it is heeding the advice of the R&A and will take the circuit to eight countries in its first season as a league next year.
Scott Scheffler, the top-ranked player in the world, said he was curious to see what would come out of the California hearing.
"If they win, come out here and play, that's something that's up to the courts, I can't control what's going to happen in a court case," he said.
- The Daily Telegraph