McMahon handed home start
McMahon is one of four changes to Michael Cheika's starting XV for the second Test against England at AAMI Park in Melbourne.
Captain Stephen Moore is joined by Sekope Kepu and James Slipper in a new-look front row while Sam Carter will don the gold jersey for the first time since June 2015.
"Based on last weekend's performance, we decided that we wanted some new combinations for Saturday's game. Sean never takes a backwards step while James and Sekope add plenty of Test match experience," Cheika said.
The backline is unchanged after it had a hand in all four of the Wallabies' tries in the first Test in Brisbane. The extended bench will be trimmed to eight later this week, which includes Western Force utility Luke Morahan, who could be in line for his first Test since his debut against Scotland in 2012.
"Obviously with his [Morahan's] selection, we're looking at a five-three split on the bench as opposed to the six forwards we had last weekend," Cheika added.
Rebels prop Toby Smith will also get the chance to run out at his home ground after being named on the bench while Wycliff Palu is set to return to the Wallabies fold after his Test career was considered all-but-over following a hamstring injury at the 2015 World Cup.
The squad also marks a return for Liam Gill, who last featured for the Wallabies in their win over Ireland on the 2013 tour.
Australia: 15 Israel Folau, 14 Dane Haylett-Petty, 13 Tevita Kuridrani, 12 Samu Kerevi, 11 Rob Horne, 10 Bernard Foley, 9 Nick Phipps, 8 Sean McMahon, 7 Michael Hooper, 6 Scott Fardy, 5 Sam Carter, 4 Rory Arnold, 3 Sekope Kepu, 2 Stephen Moore (captain), 1 James Slipper.
Replacements - from: Tatafu Polota-Nau, Toby Smith, Greg Holmes, James Horwill, Dean Mumm, Wycliff Palu, Ben McCalman, Liam Gill, Nick Frisby, Christian Leali'ifano, Luke Morahan.
Date: Saturday, June 18
Venue: Melbourne
Kick-off: 20.05 AEST; 10.00 GMT; 11.00 BST
Referee: Craig Joubert (South Africa)
Assistant referees: Nigel Owens (Wales), Mike Fraser (New Zealand)
TMO: Glenn Newman (New Zealand)