The Welshman looked comfortable heading onto the final ascent of Old Willunga Hill but was forced to concede the race lead after losing time in the final kilometre.
After Team Sky controlled the bunch for another day Edvald Boasson Hagen set an impressive tempo on the climb, but with the finish closing in a tired Thomas was left to shut down the gaps as attacks fired off the front.
Thomas training in Australia before the Tour Down Under
Tom Jelte Slagter (Blanco) powered into the box seat to win the race finishing just behind Simon Gerrans in a sprint to the summit.
The 23-year-old went into the day with a five-second deficit to Thomas but powered clear in the final metres before duking it out with Gerrans (Orica-GreenEDGE) to the line.
It was the Australian, the winner of the race overall in 2012, who narrowly edged his wheel in front to take the victory on Australia Day but it is Slagter who will take a 13-second lead to Adelaide.
Javier Moreno (Movistar) was the next of the contenders home in third, moving up to second on the podium while Thomas had to be content with fifth overall, 29 seconds back, following a brave fight.
Still sitting a single second off fourth spot, Thomas admitted he was disappointed, but was well aware of the positives, telling Sky Sports: "The legs went with around 500 metres to go.
"The boys did a great ride and then Edvald did a good turn at the end. I should have just swung over maybe and got someone else to work but I ended up pulling for a bit and I was a bit empty after that. Gerrans came past a bit too fast for me to get on his wheel and I went backwards from there.
"Immediately afterwards you're pretty gutted you didn't get the win but when we get back tonight we'll see that we've got a lot of positives to take from this. It's the first race of the year and it's been a good week and a good start to the year."
Sports Director Kurt-Asle Arvesen also couldn't fault the effort of the team after three days controlling the race, adding: “The guys did all they could. Everything looked good and everyone did their job but G just didn’t quite have the legs at the end like he did on stage two. That makes a big difference in the result but certainly not the performance.
“We already have one stage win here. Of course we would love to have kept the jersey until the end. That’s how it is. Everyone has been training and are going well. You just have to say hats off to Gerrans and Slagter today."
151.5km made up the decisive test as the peloton headed out from McLaren Vale on the Australian national holiday in front of a packed crowd.
Extensive and continuous attacks ensured the penultimate stage got off to an incredibly rapid start on the opening circuit, Team Sky pushing hard to keep the race together in the early going.
Seven riders were finally allowed clear after a prolonged battle, the peloton pronouncing themselves happy with the make-up of the move as the race settled back into a rhythm.
After Bernhard Eisel set the pace early on behalf of Team Sky other teams eventually came through to work in a bid to shut down the break, Blanco particularly active on the front as the pace shot up.
The break were finally reeled in as the peloton hit Old Willunga Hill for the first time, Team Sky taking the opportunity to re-assert their control as early attacks proved unfruitful.
As predicted sparks flew second time up the ascent, with Tiago Machado (RadioShack-Leopard) the first of the big names to hit out, followed by Moreno as Boasson Hagen kept things in check.
But it would be Gerrans and Slagter who stole away to take the plaudits after an intense day of racing.