The 24-year-old remains outside of the picture in terms of the senior side after returning to Goodison Park from a couple of loan spells and hasn't made a Premier League appearance for the Blues since the 2014-15 season.
A loan move to Fulham was affected by an ankle injury and he played just eight games for Wigan Athletic last season.
He looked to have been offered hope of reclaiming a place in the first team earlier this season when Allardyce promoted him briefly from the Under-23s as possible cover for the injured Leighton Baines.
Garbutt, whose five-year contract still has two more years to run, failed to convince Allardyce that he was a viable alternative and Cuco Martina continued to deputise for Baines until the veteran was fit regained his fitness.
Garbutt, meanwhile, dropped back to the U23s and finished their season with a goal in Friday's 2-2 draw with Manchester United's U23s.
“He's had a difficult time here and, personally, Luke Garbutt's future is elsewhere,” Allardyce said in the Liverpool Echo today.
“I don't think there is any doubt about that, based on what we've seen that he needs to be looking to move away from the football club and resurrect his career somewhere else because it's not only me who hasn't played him, it's Ronald [Koeman] and, at the back end, Roberto [Martinez].
“So his future is somewhere else and when a player has been languishing as long as he has...he would be out on loan if someone had asked for him and unfortunately for us, no-one asked for him on loan.”