Scotland could not beat Australia for a second time at the World Rugby U20 Championship and will now face Wales in the seventh-eighth place final.
The Scots led early in the second half when Scott Cummings added to tries from Hugh Fraser and Robbie Nairn.
But Australia hit back as Sione Tuipolotu scored a second try, with Liam Wright and Jordan Jackson-Hope adding scores for a 35-19 victory.
Tyrel Lomax produced the first touchdown of the evening in Salford.
Mack Mason converted all five of the Australia tries, while Adam Hastings knocked over one from two attempts, with Fraser adding the extras from captain Cummings' score.
For the first time at the tournament, Scotland won two of their three group matches, beating Australia 15-10 and Italy 27-19 either side of a sobering 44-0 defeat from England.
The young Scots meet Wales in their last match on Saturday after the Dragons were hammered 71-12 by New Zealand.
Ireland and England will contest the final.