Australian team vets left the decision until the last minute to give the horse every possible chance of recovering but decided not to risk it given the rigours of the Olympic competition.
Megan Jones and her horse Allofasudden will replace Rose, subject to approval.
The team's Equestrian Section Manager Brett Mace said Rose's absence was a setback but Jones was a capable replacement.
"There is no doubt this is a blow for the team and we feel for Shane who has worked for many years preparing Taurus for these Games," said Mace in an Australian Olympic Committee statement.
"But we had to take the advice of our vets in relation to performance and also horse welfare and therefore Megan Jones and Allofasudden will be added to the team. Megan has been working with her horse to ensure they are competition ready.
"She has the experience and proven track record to make it at this level of competition after finishing with a team silver medal and fourth individually at Beijing.
"The team now needs to focus on finalising preparation, and while Shane will be a loss, we feel our medal chances remain just as strong," he said.
The eventing competition at Greenwich Park begins on Saturday.