The squad were originally due to leave on Monday but were told to stay back after their government warned of potential security risks.
"Following the most recent information from Australian Government agencies and our own security advisers we have decided that, regrettably, we have no alternative but to postpone the tour," Cricket Australia (CA) chief executive James Sutherland said in a statement.
CA sent a delegation to Bangladesh over the weekend to assess the situation and while they were there an Italian aid worker in Dhaka was shot dead in an attack that Islamic State said it had carried out.
The delegation arrived back in Australia on Wednesday to brief government and CA officials and confirmed the cricketers could be targeted.
CA's decision came two days before the squad's scheduled warm-up match at Fatullah and despite the Bangladesh Cricket Board (BCB) offering the touring side a level of security reserved for visiting heads of state.
"This is very unfortunate. We are hoping the tour will be rearranged as soon as possible," BCB president Nazmul Hassan told Reuters. "We left no stone unturned in providing assurance regarding security for the Australian team."
'WORKED TIRELESSLY'
Australia have not played a test in Bangladesh for a decade and were due to play in Chittagong from Oct. 9 and Dhaka from Oct. 17.
"We have worked tirelessly to try to find a way for the tour to proceed but in the end it was simply not possible," Sutherland said. "We understand this decision will be very disappointing for the cricket community in Bangladesh.
"However, from an Australian perspective, the safety of our players and officials is our highest priority. We will work with the BCB to reschedule the tour as soon as possible."
The next international cricket for Steve Smith's men will be a three-test home series against New Zealand starting next month.
"The decision by Cricket Australia to postpone the tour is the correct one in these difficult circumstances particularly from a player safety and welfare point of view," Australian Cricketers' Association chief executive Alistair Nicholson said.
"From the players' point of view they fully support the decision that's been made, however, they were looking forward to facing off against a challenging Bangladesh side playing on their home turf."
Militants have targeted secularist bloggers in Bangladesh in recent years while the government has cracked down on Islamist groups seeking to impose a strict interpretation of Islamic Sharia law on the South Asian nation of 160 million people.
Security concerns have long cast a shadow over international cricket in the subcontinent, with a number of tours cancelled or postponed over the years.
Top teams have refused to tour Pakistan since militants opened fire on a Sri Lanka team bus in Lahore in 2009, killing staff and injuring a number of players.
A year before, England abandoned two one-day internationals against India after gunmen killed more than 160 people and injured hundreds more in a coordinated series of attacks in the commercial capital Mumbai.
(Additional reporting by Ruma Paul in Dhaka; Writing by Sudipto Ganguly in Mumbai; Editing by Amlan Chakraborty)
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