The ARU has traditionally prevented overseas-based players representing the Wallabies.
But the new flexible contracts allow the national body and Super Rugby provinces to reward players deemed to be making a significant contribution to the code in Australia.
ARU CEO Bill Pulver said the new policy would help retain players long-term.
"We've recognised that in the context of an increasingly global market for rugby players that we need to take a more flexible approach to player contracting," Pulver said.
"As such, we need to be proactive and adapt our policies to best serve the interests of rugby in Australia.
"By adopting a flexible contracting model, we're creating a platform for our players to experience what rugby has to offer in Australia and abroad, all while maintaining their allegiance to Australian rugby over a long-term period.
"We're confident this flexibility will encourage players to make significant long-term commitments to Australian rugby and help us to minimise the number of players who permanently re-locate to foreign leagues.
"Decisions regarding all flexible contracts will be made on a case-by-case basis, understanding that our key priority remains that the Wallabies and Super Rugby provinces have a strong and deep playing pool of talent available each year."
WHAT DO THE CHANGES MEAN?
* Currently, players aren't eligible to play for the Wallabies unless they're registered in Australia and available for selection over a full Super Rugby season
* From 2016, however, the ARU can offer long-term 'flexible contracts' to a select number of players
* Each Super Rugby team will also be allowed to offer one 'flexible contract' per season to a non-nationally contracted player
* The deal allows them to play one season in a foreign domestic competition while contracted to the ARU
* Players who represent Australia at the Rugby Sevens at the 2016 Rio Olympics will also be allowed to play the 2016/2017 Japanese domestic season without affecting their eligibility to play for the Wallabies upon their return
* The ARU will manage the contracts to make sure there's a "sufficiently strong pool" of players available for Test selection each year.
- AAP