Renshaw began feeling unwell before play in the third Test against South Africa at the SCG on Wednesday morning, and made a point of avoiding contact with teammates during the pre-match anthems.
He was spotted sitting away from players during the first session before team officials confirmed he was positive on a rapid antigen test.
Handscomb was a notable inclusion on Australia's team list as an emergency fielder, despite not being named in the 14-man squad for the match.
Under ICC laws brought in during the COVID-19 pandemic, players can be substituted out of a match if they test positive and feel unfit to play.
Players are able to continue playing if they feel well enough, and at this stage Renshaw will be allowed to take part while maintaining a distance from teammates.
"Matthew Renshaw reported feeling unwell shortly before play in the third NRMA Insurance Test match against South Africa in Sydney and was separated from the squad," a Cricket Australia spokesman said.Â
"Renshaw has since returned a positive RAT test. He will continue to take part in the match."
If Renshaw did need to be substituted out, Handscomb would fit that category of a like-for-like player.
That would mark most unfortunate timing for Renshaw, who has not played a Test since 2018 in South Africa.
He suffered a concussion in a warm-up game later that year in the UAE, and has not featured in an Australian team again until this Test when he was recalled in place of the injured Cameron Green.
Any opportunity would, however, create a golden chance for Handscomb, who was last dropped from the Test team in January 2019.
The Victorian has since starred in the Sheffield Shield, leading the run-scoring charts with 571 at an average of 81.57 including a top score of 281.
Both Handscomb and Renshaw are considered some chance to make the four-Test tour to India next month.
Renshaw's positive test comes just a day after captain Pat Cummins light-heartedly said he could not believe the team had avoided catching COVID throughout the Test summer.
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