Captain Tim Paine said at the toss on Friday that Starc had been "battling some injuries throughout the tour" and had been rested from the final Test.
But Cricket Australia’s website later stated that his injury was a stress fracture and that he would fly home after the Test for further assessment.
Starc had been signed by Kolkata Knight Riders for the IPL, which starts on April 7.
He is the third high-profile Australian to be ruled out of the lucrative tournament following the cancellation of the contracts of Steve Smith and David Warner, both banned by Cricket Australia for their part in the ball tampering controversy during the South African Test series.
Starc was man of the match in the first Test in Durban but only took three wickets for 304 runs in the next two Tests.