ACT Brumbies' Nic White has been promoted in place of Genia, who was also stripped of the captaincy in a stinging blow for a player rated one of the world's finest scrum-halves.
Number eight Ben Mowen, who made his Test debut against the British and Irish Lions less than three months ago, will lead the team in Perth as regular skipper James Horwill battles to recover from a hamstring strain.
"The fact that Will has captained his country shows what high regard we hold him in and, while he is naturally disappointed, I also know how competitive he is and I've got no doubts he will train himself to a standstill to bounce back as a better player," McKenzie said.
"We've spoken about what areas we believe he can continue to improve and evolve his game and he was receptive to going back and addressing those things.
"In the end, it wasn't an easy decision because he is undoubtedly a world class player.
"However, we also feel Nic has earned an opportunity to start and will add his own uniqueness and point of difference to how we want to play this game."
McKenzie also tweaked a pack that has been hit by a number of injuries and struggled in last week's 38-12 demolition by South Africa and the two previous defeats to world champions New Zealand.
Tighthead prop Ben Alexander has been promoted from the bench at the expense of Sekope Kepu, while lock Sitaleki Timani comes into the reserves.
Backrower Ben McCalman retained the place on the bench he was handed by Horwill's injury, while centre Tevita Kuridrani was also given a spot among the replacements in place of fellow Brumbies back Jesse Mogg.
Barring Genia's demotion, the backline remains largely unchanged with James O'Connor and Nick Cummins swapping wings and Quade Cooper keeping his place at fly-half.
Having started his tenure with three successive losses that have the Wallabies at the bottom of the standings, McKenzie had said he would "dumb down" his game-plan after the team's comprehensive defeat to South Africa.
On Wednesday, however, he defended his coaching staff's approach amid criticism in the wake of the Lang Park debacle.
"Australian rugby is renowned for smart, attractive and running rugby and there is a continued determination from the coaching staff and players to play with ambition and flair," he said.
"We aren't moving away from this philosophy."
Team: 15-Israel Folau, 14-James O'Connor, 13-Adam Ashley-Cooper, 12-Christian Leali'ifano, 11-Nick Cummins, 10-Quade Cooper, 9-Nic White, 8-Ben Mowen (capt), 7-Michael Hooper, 6-Scott Fardy, 5-Kane Douglas, 4-Rob Simmons, 3-Ben Alexander, 2-Stephen Moore, 1-James Slipper
Replacements: 16-Saia Fainga'a, 17-Scott Sio, 18-Sekope Kepu, 19-Sitaleki Timani, 20-Ben McCalman, 21-Will Genia, 22-Matt Toomua, 23-Tevita Kuridrani