Australia lost top spot in the International Cricket Council’s Test rankings after Sri Lanka won the third Test by 163 runs for a 3-0 series win.
India have taken over first place – but will relinquish it to Pakistan if they fail to win the final Test of their current series in West Indies.
Sri Lanka declared their second innings on 347-8 early on day five in Colombo, setting the Aussies 324 to win.
But only David Warner (68) resisted as spinner Rangana Herath took 7-64.
Sri Lanka’s success also means South Africa – who began 2016 as number one before losing to England in January – are down to seventh in the rankings.
Australia crumbled in 44.1 overs against an all-spin attack in the second innings at the spin-friendly Sinhalese Sports Club – indeed, only 17 of the 169.2 overs they faced in the match were bowled by seamers.
Shaun Marsh, a centurion from the first innings, added 77 for the first wicket with Warner but both fell to off-spinner Dilruwan Perera, and the rest of the Australia line-up could not cope with the wily Herath, who returned match figures of 13-145.
As well as being named man of the match, he was also chosen as man of the series as Sri Lanka regained the Warne-Muralitharan Trophy, named after the two most prolific spinners in Test history.
ICC Test rankings:
2 – Pakistan – 111 points
3 – Australia – 108 points
4 – England – 108 points
5 – New Zealand – 99 points