Edwards, the Supercup Championship leader, was in the passenger seat as an instructor for a private training session at Queensland Raceway at Willowbank, outside Brisbane, Porsche Motorsport said.
A 20-year-old local driver was behind the wheel when the car crashed into a tire wall and caught fire. The driver was taken to a hospital and is reported to be in a critical condition with severe burns and broken bones.
Sean Edwards was recently involved in director Ron Howard's movie "Rush" about the 1976 Formula One season. Guy Edwards was one of the drivers who helped pull Niki Lauda from his burning car during the 1976 German Grand Prix.
Sean Edwards had told fans he would be in Australia on a short visit before returning for the last two races of the Supercup series.
In his last post on Twitter, he said: "Time to hit Queensland Raceway today, should be fun, hope there aren't too many kangaroos like at Bathurst!" — a reference to Australia's premier endurance auto racing event last weekend.
Hartmut Kristen, Head of Motorsport at Porsche, called Edwards "one of the most popular and successful" drivers in the Porsche series. Edwards won the Nurburgring and Dubai 24 Hours this year.
"Sean was a hugely promising young racer who came through the junior formulas in Britain before making a career in international sports car racing," the British Motor Sports Association said.