With the inspirational Paul O'Connell (broken arm) and damaging prop Alex Corbisiero (calf) ruled out, the Lions have changed a third of their starting side.
Dynamic halfback Ben Youngs replaces Phillips, hard-tackling Welsh flanker Dan Lydiate takes Croft's blindside spot while English duo Geoff Parling and Mako Vunipola come into the tight five.
With Australia winning the breakdown battle in the second half, Gatland admitted he reviewed his team as though Kurtley Beale had nailed his late match-winning penalty attempt.
In doing that, the Wales mentor has brought in his 2012 Six Nations player of the tournament, Lydiate, to add grunt while tireless back-rower Sean O'Brien is on the bench to lock horns with Wallabies opensides Michael Hooper and Liam Gill late in the game.
"This is a do-or-die match for Australia. It's going to be a real battle out there and we decided to bring more physicality to our side up front and Dan brings that,'' Gatland said.
"We also wanted to have some explosiveness off the bench and Tom brings that with Sean O'Brien.''
Croft's bench selection at the expense of a specialist lock is a calculated risk as it would leave the tourists short if a second-rower is injured.
Gatland said the changes highlighted how strong the depth was in his squad, particularly citing Youngs' selection ahead of Welshman Phillips, who didn't even make the bench.
"(Phillips) was fit and available but he's had problems with his knee,'' he said. ``The decision was to rest him for this week and he's potentially a key component for next week.''
With the relevance of Lions tours being questioned in the northern hemisphere due to their failure to win a series since 1997 in South Africa, they are desperate to seize the moment at Etihad Stadium.
Lions: Leigh Halfpenny, Tommy Bowe, Brian O'Driscoll, Jonathan Davies, George North, Jonny Sexton, Ben Youngs, Jamie Heaslip, Sam Warburton (capt), Dan Lydiate, Geoff Parling, Alun Wyn Jones, Adam Jones, Tom Youngs, Mako Vunipola. Res: Richard Hibbard, Ryan Grant, Dan Cole, Tom Croft, Sean O'Brien, Conor Murray, Owen Farrell, Alex Cuthbert.
-AAP