AUSTRALIA'S inability to combat spin on the subcontinent has reared its ugly head again, as Steve Smith yesterday suffered his first loss in 12 matches as Test captain.
Australia resumed on 3-83 and was spun out for 161, losing by 106 runs. A big-turning wicket is likely to greet the tourists for the second Test in Galle starting on Thursday.
"Galle is the biggest spinning place here in Sri Lanka, or so we've been told, so it's going to play a big part again," Smith said. 
Suddenly the game's No.1-ranked side are battling to avoid defeat in the three-match series after starting as strong favourite to win the first Test. It was Australia's seventh consecutive loss in away Tests against subcontinental teams.
"It is disappointing," said Smith, who top-scored with 55.
"I said before the game that we haven't played well in subcontinent conditions for quite a while now.
"It's something that under my captaincy I want to change." Veteran spinner Rangana Herath claimed 5-54 in the second innings and had match figures of 9-103.
The jubilant home side's win at Kandy's Pallekele Stadium was much anticipated. It came 17 years after Sri Lanka's only other triumph against Australia at Kandy's Asgiriya Stadium. Herath and debutant spinner Lakshan Sandakan dominated the match, taking 16 wickets between them. Sri Lanka's 21-year-old Kusal Mendis was named man of the match for his brilliant second-innings knock of 176.
Spinner Steve O'Keefe, who has been ruled out of the Galle Test due to a hamstring injury, limped out to bat yesterday with Australia reeling at 8-157. Only one scoring shot was played in 29.4 overs, as O'Keefe and Peter Nevill shared a ninth-wicket stand of four runs off 178 balls at a run-rate of 0.13.
It's the lowest scoring rate in a partnership in Test history, with a minimum of 100 deliveries.
Herath fittingly claimed the final wicket, bowling O'Keefe.
Australia had lost 4-58 in the first session yesterday, and when Smith fell at 6-140, even surviving to tea and hoping for bad light was out of the question.
"(Chasing 267) against quality spinners were going to be a tough task and we weren't up to it," Smith said.
The skipper blasted his side's lack of discipline with the bat. "I was really proud of the way Peter Nevill and Stephen O'Keefe fought hard at the end," Smith said. "If Stephen was able to run we would have scored a few runs there as well. We let the spinners into the game a lot more than we probably should have." Victoria's Jon Holland is travelling to Sri Lanka this weekend and is set to make his debut in Galle as a replacement for O'Keefe.
FIRST TEST SRI LANKA V AUSTRALIA day five, kandy SRI LANKA first innings 117 AUSTRALIA first innings 203 SRI LANKA second innings 353 AUSTRALIA second innings J BURNS b Sandakan ..................29 D WARNER b Herath ....................1 U KHAWAJA lbw D Perera "..........18 S SMITH lbw Herath ...................55 A VOGES c & b Herath ...............12 M MARSH lbw Herath .................25 P NEVILL c Chandimal b de Silva ..9 M STARC c & b Sandakan .............0 N LYON lbw Sandakan ..................8 S O'KEEFE b Herath ......................4 J HAZLEWOOD not out .................0 Sundries ........................................0 TOTAL161 Fall: 2 (Warner), 33 (Khawaja), 63 (Burns), 96 (Voges), 139 (Marsh), 140 (Smith), 141 (Starc), 157 (Lyon), 161 (Nevill), 161 (O'Keefe).
Bowling: N Pradeep 6-3-16-0, R Herath 33.3-16-54-5, D Perera 13-3-30-1, L Sandakan 25-8-49-3, D de Silva 11-7-12-1.
Sri Lanka won by 106 runs.Second Test starts Thursday.