Folau, who played his first five tests on the wing, is one of just two starters from last week's win over New Zealand named in the side.
The other is backrowerJack Dempsey, who has switched from blindside to openside flanker in the absence of captain Michael Hooper, one of many regular starters rested from the Allianz Stadium match.
With Folau shifted, the fullback spot will be filled by fellow code-hopper Karmichael Hunt, who made his test debut at inside centre back in June but has played most of his rugby for Queensland in the No.15 jersey.
The side includes two uncapped players in Reds' five-eighth Duncan Paia'aua and Western Force inside centre Billy Meakes.
However Paia'aua and Meakes won't get a cap and will have to wait to make an official Wallabies debut, as Saturday's match isn't classified as a test.
Prop Allan Alaalatoa and centre Samu Kerevi, two of the rising stars of Australian rugby, have been named as vice-captains.
Hooker and former Wallabies skipper Stephen Moore, who will play for the last time in a gold jersey on home soil, has been named on the bench behind Melbourne Rebels rake Jordan Uelese.
The run-on side also includes prop Tom Robertson, who has signed a new three-year contract with Australia and the NSW Waratahs.
Wallabies team: Karmichael Hunt, Henry Speight, Samu Kerevi, Billy Meakes, Israel Folau, Duncan Paia'aua, Nick Phipps (capt), Lopeti Timani, Jack Dempsey, Ned Hanigan, Lukhan Tui, Rory Arnold, Allan Alaalatoa, Jordan Uelese, Tom Robertson.
Res: Stephen Moore, Tetera Faulkner, Jermaine Ainsley, Kane Douglas, Ben McCalman, Joe Powell, Curtis Rona, Izaia Perese.