All-rounder Mitchell Marsh will captain the side, while veteran opening batsman David Warner has been picked for what is shaping as his final international tournament.
"Mitchell has been an exemplary player and leader within the group for a long period of time," said Cricket Australia chair Mike Baird.
Test skipper Pat Cummins, paceman Mitchell Starc and explosive batting all-rounder Glenn Maxwell are among the experienced players in the 15-man squad, with 11 having taken part in the 2021 T20 World Cup-winning campaign.
Selector George Bailey said there had been "long conversations" about whether to include talismanic batsman Smith in the side, following a dip in his limited-overs form.
Bailey said selectors would be keeping a close eye on the 22-year-old Fraser-McGurk, who has been in rampant batting form for the Delhi Capitals in the Indian Premier League.
"Ultimately the balance of the final 15 needs to provide the best chance of being successful in this campaign," Bailey said.
The Twenty20 World Cup will be played in the United States and West Indies in June.
Australia squad for T20 World Cup:
Mitchell Marsh (capt), Ashton Agar, Pat Cummins, Tim David, Nathan Ellis, Cameron Green, Josh Hazlewood, Travis Head, Josh Inglis, Glenn Maxwell, Mitchell Starc, Marcus Stoinis, Matthew Wade, David Warner, Adam Zampa
