Leeds accept Socceroo Kilkenny off to Olympics
The Scot admits he is powerless to prevent the Australian from joining up with his national team, but says it is a great opportunity for the 22-year-old.
Australian national coaches can use FIFA rules to secure his release, but McAllister says he would never stand in the player's way.
McAllister told the club's official website: "They assure us he will have the best treatment - he was carrying an injury at the end of last season - and the Australians are extremely professional in every sport.
"As much as it's a blow to us, for a player to represent his country is a must and to have a chance of playing in the Olympic Games is something you can't buy. The fact is also when he arrives back here he will be match fit and ready to play."