McDermott will resume his half-back partnership with three-cap fly half Carter Gordon at Dunedin Stadium on Saturday as Australia look for their first win of the year.
In a forced change in the front row, Pone Fa'amausili gets his first start at tighthead prop in place of Allan Alaalatoa, who ruptured his Achilles tendon while captaining the side last week and will miss the World Cup.
Zane Nonggorr, who has played one test, will back up Fa'amausili from the bench, where lock Will Skelton will also start the game to allow Richie Arnold a run-on role in the second row.
Jones has also taken a gamble in his back row with Fraser McReight returning at openside flanker and young gun Tom Hooper moving across to start on the blind side in place of Jed Holloway, who was dropped.
"We started a regeneration as a team last week and now it's about building on that with a new captain and a new era in Australian Rugby," said Jones.
"Tate's got all the attributes to be a great captain of his country and there's no doubt it will be a proud moment for him and his family when he leads the team on Saturday night."
