Farrell was rested for last weekend's 21-8 victory over Argentina but returns to the fold this time around, replacing Henry Slade at inside centre.
Anthony Watson has also been included at full-back for the first time at international level due to Mike Brown's concussion, with Jonny May starting on the wing and Joe Launchbury coming in at second-row in a side which shows four changes to the one which beat the Pumas.
"The players have had an extremely positive week. We will have to be effective in everything we do to win," head coach Eddie Jones told reporters.
"This is going to be a great challenge, as we know Australia have been in great form towards the end of their season."
Australia have beaten New Zealand and Wales in recent weeks, but have lost all four of their meetings with Jones's England.
England team to face Australia: Team: Watson, May, Joseph, Farrell, Daly; Ford, Youngs; M Vunipola, Hartley, Cole; Launchbury, Lawes; Robshaw, Underhill, Hughes
Replacements: George, Marler, Williams, Itoje, Simmonds, Care, Slade, Rokoduguni