"Our focus will be on those most in need - the women, children and families of persecuted minorities who have sought refuge from the conflict in Jordan, Lebanon and Turkey," said a statement issued by Abbott's office.
"In addition, Australia will provide humanitarian support to more than 2,40,000 Syrian and Iraqi people who have been forced to flee their homes or seek refuge in neighbouring countries. This is expected to cost $44 million," it said.
This funding will deliver much-needed food, water, healthcare, education, emergency supplies and protection, including support for women and girls, the statement said, adding that a team of government officials will leave to identify and process potential candidates for resettlement.
The decision follows consultations with the United Nations High Commissioner for Refugees and other humanitarian agencies in Geneva.
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The 12,000 places will be in addition to the existing humanitarian programme of 13,750, which rises to 18,750 in 2018-19.
Abbott said Australia, already part of the US-led coalition fighting IS in Iraq, will launch air strikes against Islamic State targets in Syria within days.
"Destroying this death cult is essential, not just to ending the humanitarian crisis in the Middle East but also to ending the threat to Australia and the wider world," he told reporters in Canberra.
"Australia remains committed to the international effort to counter Daesh, which threatens stability in Iraq and the Middle East and the security of Australians at home and in our region. We cannot defeat Daesh in Iraq without defeating Daesh in Syria too," Abbott said, using an Arabic name for the IS.
The legal basis for these operations is the collective self-defence of Iraq, he said about the decision that is "firmly in Australia's national interest".
He said that the Daesh death cult is reaching out to Australians, as terrorist incidents and disrupted attacks here have demonstrated.
He, however, said the focus of the campaign would be on the terror group and not the Bashar al-Assad regime, "evil though it is".