Paul gets his third start of the season at hooker, ousting Tai McIsaac.
Coach John Connolly said: "There were some very tough selection decisions, particularly in the back row, but we feel that Phil Waugh deserves his opportunity in the starting team.
"George Smith has been very good for us throughout the season and is one of the world's best in his position, but we are very keen to see what Phil can bring to the mix.
"The wing was also very contentious and there has been nothing between the outside backs throughout the season."
Australia need a victory to stand any chance of claiming the Tri-Nations crown.
Australia: Chris Latham, Clyde Rathbone, Stirling Mortlock, Matt Giteau, Lote Tuqiri, Stephen Larkham, George Gregan (captain), Wycliff Palu, Phil Waugh, Rocky Elsom, Dan Vickerman, Nathan Sharpe, Rodney Blake, Jeremy Paul, Greg Holmes.
Reserves: Tai McIsaac, Al Baxter, Mark Chisholm, George Smith, Brett Sheehan, Mark Gerrard, Mat Rogers.