diff --git a/MODULE.bazel b/MODULE.bazel
index ab43f13..652f5aa 100644
--- a/MODULE.bazel
+++ b/MODULE.bazel
@@ -1,6 +1,6 @@
 module(
     name = "bazel-diff",
-    version = "11.0.3",
+    version = "12.0.0",
     compatibility_level = 0,
 )
 
diff --git a/MODULE.bazel.lock b/MODULE.bazel.lock
index 1728fc4..9c1de3b 100644
--- a/MODULE.bazel.lock
+++ b/MODULE.bazel.lock
@@ -169,7 +169,7 @@
     "//:extensions.bzl%non_module_repositories": {
       "general": {
         "bzlTransitiveDigest": "9kscpNTrmoEECh40kS6bqcncGbg5lZ8bpWLxD8wpc2Q=",
-        "usagesDigest": "B/ulmGDgTJJ7blCuwEJsJ0wV1kMPVgF36azpv5dXn58=",
+        "usagesDigest": "ve8ewrWzumEcpto97uBCb2LV/hQ06Fa7XjaryJyTWWA=",
         "recordedFileInputs": {},
         "recordedDirentsInputs": {},
         "envVariables": {},
diff --git a/README.md b/README.md
index b70f301..239388e 100644
--- a/README.md
+++ b/README.md
@@ -272,7 +272,7 @@ First, add the following snippet to your project:
 #### Bzlmod snippet
 
 ```bazel
-bazel_dep(name = "bazel-diff", version = "11.0.3")
+bazel_dep(name = "bazel-diff", version = "12.0.0")
 ```
 
 You can now run the tool with:
diff --git a/cli/src/main/kotlin/com/bazel_diff/hash/SourceFileHasher.kt b/cli/src/main/kotlin/com/bazel_diff/hash/SourceFileHasher.kt
index 6cda7ca..be10bbe 100644
--- a/cli/src/main/kotlin/com/bazel_diff/hash/SourceFileHasher.kt
+++ b/cli/src/main/kotlin/com/bazel_diff/hash/SourceFileHasher.kt
@@ -88,6 +88,8 @@ class SourceFileHasherImpl : KoinComponent, SourceFileHasher {
       if (relativeFilenameToContentHash?.contains(filenamePathString) == true) {
         val contentHash = relativeFilenameToContentHash.getValue(filenamePathString)
         safePutBytes(contentHash.toByteArray())
+        // Mark that file exists (via content hash)
+        putBytes(byteArrayOf(0x01))
       } else {
         val absoluteFilePath = workingDirectory.resolve(filenamePath)
         val file = absoluteFilePath.toFile()
@@ -98,9 +100,13 @@ class SourceFileHasherImpl : KoinComponent, SourceFileHasher {
             } else if (modifiedFilepaths.any { workingDirectory.resolve(it) == absoluteFilePath }) {
               putFile(file)
             }
+            // Mark that file exists
+            putBytes(byteArrayOf(0x01))
           }
         } else {
           logger.w { "File $absoluteFilePath not found" }
+          // Mark that file is missing
+          putBytes(byteArrayOf(0x00))
         }
       }
       safePutBytes(sourceFileTarget.seed)
diff --git a/cli/src/test/kotlin/com/bazel_diff/hash/SourceFileHasherTest.kt b/cli/src/test/kotlin/com/bazel_diff/hash/SourceFileHasherTest.kt
index 5efd14d..c676fe7 100644
--- a/cli/src/test/kotlin/com/bazel_diff/hash/SourceFileHasherTest.kt
+++ b/cli/src/test/kotlin/com/bazel_diff/hash/SourceFileHasherTest.kt
@@ -2,6 +2,7 @@ package com.bazel_diff.hash
 
 import assertk.assertThat
 import assertk.assertions.isEqualTo
+import assertk.assertions.isNotEqualTo
 import assertk.assertions.isNull
 import com.bazel_diff.bazel.BazelSourceFileTarget
 import com.bazel_diff.extensions.toHexString
@@ -38,6 +39,7 @@ internal class SourceFileHasherTest : KoinTest {
     val expected =
         sha256 {
               safePutBytes(fixtureFileContent)
+              putBytes(byteArrayOf(0x01))
               safePutBytes(seed)
               safePutBytes(fixtureFileTarget.toByteArray())
             }
@@ -53,6 +55,7 @@ internal class SourceFileHasherTest : KoinTest {
     val expected =
         sha256 {
               safePutBytes(fixtureFileContent)
+              putBytes(byteArrayOf(0x01))
               safePutBytes(seed)
               safePutBytes(fixtureFileTarget.toByteArray())
             }
@@ -68,6 +71,7 @@ internal class SourceFileHasherTest : KoinTest {
         hasher.digest(bazelSourceFileTarget, setOf(Paths.get("some/other/path"))).toHexString()
     val expected =
         sha256 {
+              putBytes(byteArrayOf(0x01))
               safePutBytes(seed)
               safePutBytes(fixtureFileTarget.toByteArray())
             }
@@ -89,6 +93,7 @@ internal class SourceFileHasherTest : KoinTest {
     val expected =
         sha256 {
               safePutBytes(externalRepoFileContent.toByteArray())
+              putBytes(byteArrayOf(0x01))
               safePutBytes(seed)
               safePutBytes(externalRepoFileTarget.toByteArray())
             }
@@ -104,6 +109,7 @@ internal class SourceFileHasherTest : KoinTest {
     val expected =
         sha256 {
               safePutBytes(fixtureFileContent)
+              putBytes(byteArrayOf(0x01))
               safePutBytes(seed)
               safePutBytes(fixtureFileTarget.toByteArray())
             }
@@ -136,6 +142,7 @@ internal class SourceFileHasherTest : KoinTest {
     val actual = hasher.digest(bazelSourceFileTarget).toHexString()
     val expected =
         sha256 {
+              putBytes(byteArrayOf(0x00))
               safePutBytes(seed)
               safePutBytes(target.toByteArray())
             }
@@ -163,6 +170,7 @@ internal class SourceFileHasherTest : KoinTest {
     val expected =
         sha256 {
               safePutBytes("foo-content-hash".toByteArray())
+              putBytes(byteArrayOf(0x01))
               safePutBytes(seed)
               safePutBytes(fixtureFileTarget.toByteArray())
             }
@@ -180,6 +188,7 @@ internal class SourceFileHasherTest : KoinTest {
     val expected =
         sha256 {
               safePutBytes(fixtureFileContent)
+              putBytes(byteArrayOf(0x01))
               safePutBytes(seed)
               safePutBytes(fixtureFileTarget.toByteArray())
             }
@@ -198,10 +207,40 @@ internal class SourceFileHasherTest : KoinTest {
     val expected =
         sha256 {
               safePutBytes("foo-content-hash".toByteArray())
+              putBytes(byteArrayOf(0x01))
               safePutBytes(seed)
               safePutBytes(targetName.toByteArray())
             }
             .toHexString()
     assertThat(actual).isEqualTo(expected)
   }
+
+  @Test
+  fun testHashEmptyFileVsDeletedFile() = runBlocking<Unit> {
+    // Create a temp directory for testing
+    val testDir = Files.createTempDirectory("empty_file_test")
+    val emptyFilePath = testDir.resolve("path/to/empty.txt")
+    Files.createDirectories(emptyFilePath.parent)
+    Files.createFile(emptyFilePath)
+
+    val emptyFileTarget = "//path/to:empty.txt"
+    val hasher = SourceFileHasherImpl(testDir, null, externalRepoResolver)
+
+    // Hash the empty file (file exists)
+    val emptyFileHash = hasher.digest(BazelSourceFileTarget(emptyFileTarget, seed)).toHexString()
+
+    // Delete the file
+    Files.delete(emptyFilePath)
+
+    // Hash the non-existent file
+    val deletedFileHash = hasher.digest(BazelSourceFileTarget(emptyFileTarget, seed)).toHexString()
+
+    // The hashes should be different (file exists vs file missing)
+    assertThat(emptyFileHash).isNotEqualTo(deletedFileHash)
+
+    // Clean up
+    Files.deleteIfExists(emptyFilePath.parent)
+    Files.deleteIfExists(testDir.resolve("path"))
+    Files.deleteIfExists(testDir)
+  }
 }