Coach and selector Darren Lehmann is determined to have five bowlers in his team.
Lehmann has hinted pace-bowling allrounder Watson is unlikely to play as a batsman only, despite Watson's unbeaten 83 in Sunday's eight-wicket win over England in the fourth Ashes Test in Melbourne.
Australia have fielded the same 11 all summer but batting coach Michael Di Venuto admitted on Monday Watson was in doubt.
Fast bowler Ryan Harris is also under an injury cloud because of knee soreness and a foot blister.
And No.6 batsman George Bailey, who's averaging 27.20 in his debut series, could face the axe in a reshuffled batting order.
Australia have named a 14-man squad including uncapped No.3 batsman Alex Doolan, uncapped paceman Nathan Coulter-Nile and one-Test allrounder James Faulkner.
The inclusion of Faulkner if Watson fails a fitness test is unlikely to be a straight swap given that Watson bats at No.3.
Faulkner could find himself batting as low as No.7, one spot below in-form wicketkeeper/batsman Brad Haddin.
Coulter-Nile would be a possible replacement for Harris, who is determined at 34 to complete a memorable series by playing at the SCG as the home side chase a 5-0 sweep.
"Our number three's under a bit of a fitness cloud, Shane Watson with his groin and body in general," Di Venuto told reporters on Monday.
"So Alex is just providing cover for Shane if he doesn't come up.
"But as we saw yesterday he moved pretty well in the middle during his 80-odd so we're hopeful he'll be up and about for Sydney both bowling and batting.
"We've also got an allrounder in James Faulkner as well so things might change around ... it's all up in the air at the moment.
"James gives us options, Alex gives us options as a number three batter as well. So we've got options if people don't come up."
Doolan, who has played under Bailey's captaincy in two Sheffield Shield-winning teams, said his fellow Tasmanian deserved an extended period in the baggy green cap.
"He's probably not making as many as he would like but he's four games into a career and there aren't too many guys who walk onto the scene and dominate from the get-go," said Doolan, 28.
"So I would hope he's given a good enough chance to set his mark."
Australia bowling coach Craig McDermott said Harris had suffered a blister after bowling in new boots.
"He's got some niggles and so has Watto," McDermott said.
"Ryan came off with a blister the other day but a blister's a blister and that'll settle down by the time we start training in Sydney.
"Most of the guys bowl with brand new boots all the time.
"He cuts out a certain part of the back of his boot and I don't think it was quite done correctly by whoever does it for him."
McDermott said having Watson in the side as a genuine allrounder is an unbelievable help to the side, as South Africa have found with Jacques Kallis who's retiring this week.
South Africa host Australia for three Tests in February.
"They're going to have an enormous hole now that he's retired come our series," McDermott said.