Miranda Ayim of London, Ont., led Canada with 11 points and seven rebounds while Edmonton's Katherine Plouffe added 10 points and Kia Nurse of Hamilton scored eight. Erin Phillips scored 16 points to lead the Australian attack.
The Canadians were coming off an impressive 91-71 qualification win over the Czech Republic, but couldn't match that output against a deep Australian side.
"We weren't the same team at the offensive end tonight," Canadian head coach Lisa Thomaidis said on a conference call. "Certainly Australia had something to do with that. It wasn't just all of us not showing up by any means. They were tough defensively."
Australia (4-0) led 26-20 before scoring 10 of the final 14 points of the half, capped by another three by Leilani Mitchell just before the buzzer to take a 36-24 advantage into the break.
Canada (2-3) got within 10 in the third quarter on consecutive three-pointers, but could get no closer as Phillips took over.
"We did a good job on them defensively for the most part," Thomaidis said. "They weren't shooting the ball terribly well and they gave us chances. The door was still open for us to come out and take it from them. But again, just a hard time putting the ball in the hoop and scoring any easy buckets.
"We didn't have any easy ones tonight."
Spain advanced to the semifinals with a 71-55 win over China. In the late quarter-finals, host Turkey faces Serbia and the United States meets France.
While they won't be contending for a medal, the Canadians did meet their goal of finishing in the top eight. Canada will play in classification games on Saturday and Sunday and can still finish as high as fifth overall.
"Our world ranking is No. 9 right now," Thomaidis said. "So anything we can do to help raise our world ranking and garner more respect and notoriety on the world scene, that's always going to be great for Canada and this team moving forward."
Canada finished 12th at the last world championship in 2010.
— With files from The Associated Press.