Cadeyrn Neville gave debutant Ben Donaldson the chance to win the game with the final kick, but the replacement fly-half pushed his effort to the right of the posts.
It was cruel on Donaldson, but no more than Italy deserved after a brilliant display, claiming their first-ever win over the Wallabies at the 19th attempt.
Australia, meanwhile, have seen every game of this Autumn Nations Series decided by a single point, coming out on the right side against Scotland before successive one-point losses to France and Italy.
They had trailed 17-3 at one point in the first half, thanks to tries from Pierre Bruno and Capuozzo, with Tom Wright getting them back in it.
And when Fraser McReight went over early in the second half to cut the lead to two, it seemed like the danger had passed.
But Italy were outstanding all game, and they grabbed a third try through Capuozzo to leave Australia with a mountain to climb once again. Tom Robertson and Neville both crossed and it looked like Dave Rennie’s men might just do it, but that final conversion eluded them.
Italy had lost fly-half Paolo Garbisi to injury before kick-off, with Tommaso Allan promoted to the starting line-up and Edoardo Padovani coming onto the bench. That was a factor, they missed 14 points from the tee over the 80 minutes.
Garbisi’s absence did not appear to affect them early on though, and when the Wallabies failed to deal with opening kick-off, Italy pounced, earned a penalty and Allan put them 3-0 up.
The lead did not last long. Italy were turned over on the restart and after kicking to touch on a first penalty, Australia then decided to take the three points from in front as Noah Lolesio levelled matters.
A poor missed penalty from Allan cost Italy the chance to go back in front, but they did not have to wait long.
ITALY FLOURISH AGAINST 14
Australia lost scrum-half Jake Gordon to the sin-bin when he took out Allan following a clever grubber through. That all came from a counter-attack from Monty Ioane, who was clearly relishing coming up against the country of his birth.
With the Wallabies down to 14, Italy went to their driving maul. While Australia survived first time around, they struggled to deal with a second, pulling it down just short of the line, before Bruno got over in the corner with his side playing with advantage.
Allan converted from the touchline to make it 10-3 and it was not long until that lead was out to 14 points. After a great turnover just inside Australian territory, the Italians showed sensational hands to open up space on the right, and in the end, it was Capuozzo who played the two-on-one to perfection, selling the dummy and ghosting through. Again, Allan converted from out wide.
Australia needed a response and they got one, Wright finishing in spectacular fashion in the left corner after the forwards had built up pressure close to the line.
Noah Lolesio missed with two attempts at a conversion though – Ioane over-eager with his chase on the first – and the Wallabies went in 17-8 down at the break.
WALLABY COMEBACK
Australia made a flying start to the second half and were rewarded for their new-found purpose as McReight crashed over from close range as Italy just ran out of defenders. Lolesio’s conversion made it a two-point game.
The game continued at a frantic pace, Italy had the chance to stretch their lead when Hunter Paisami was penalised for a high tackle on Juan Ignacio Brex, Allan just off-target with his kick at goal.
He did not have to wait long though, with Australia conceding a penalty a minute later and this time there was no mistake from the fly-half as he made it 20-15.
Australia’s lineout was proving an issue. First they turned down a simple penalty to go to the corner, only for no one to jump and the ball to be overthrown. Gianmarco Lucchesi was first to it and sprinted away, showing the pace of a winger rather than a hooker to get to halfway.
Not long after, another attacking lineout went awry, Lachlan Lonergan not straight with his first throw after coming on.
And that proved costly when Italy won a kicking battle to earn a lineout on the Australian 22. They shaped to set up the maul before going to the backs and some slick interplay allowed Capuozzo to race in for his second.
Allan missed the conversion and was forced off soon after when he was tackled late by Robertson. From the resulting lineout though, Italy lost possession and to rub salt into the wounds, it was the replacement prop who went over in the corner. Lolesio converted to bring the score back to 25-22.
With Allan off, it was Padovani who took over kicking duties, with one horrible mishit, followed by a better effort a few minutes later to make it a six-point game.
That meant Australia would have to score a converted try to win it, and they got all the way up to the Italian line, with Neville eventually getting over. It left Donaldson a chance to be the hero, from about 10 metres in from the touchline, but he could not convert.
So it was Italy who hung on, with jubilant scenes in Florence as they made it two from two this November.
