Skaife choked as soon as the starting flag dropped, with a slipped clutch that saw him drop to the back of the field before the first corner.
Jaws dropped in the Holden Racing Team pits when moments later Skaife radioed in that he'd been hit from behind.
Seconds later he ploughed into a nearby fence. His car and team's hopes for winning ended at that moment.
Skaife was crawling in the left lane when rookie Jack Perkins came over a rise unaware and sent Skaife flying into the wall.
The Perkins Jack Daniels commodore immediately started flaming around the front left wheel after the hit, but he was able to limp around the track to get back to his pits.
Skaife wasn't so lucky and won't return for the rest of the race.
Skaife admitted earlier he was feeling the pressure to win the race for legend Peter Brock who was earlier memorialised with a eerie minute's silence.
There were no pre-race jitters evident in the champ early this morning as he treated fans to a series of balletic figure-eight burnouts, calmly waving to fans while unleashing his V8 Commodore with controlled fury.
The mood changed quickly after the race and Skaife's wife was seen crying in the pits of the HRT camp as the defending champ's day was over so early.
Ford's Jason Bright currently leads the race with Jason Richards second in a Holden and Craig Lowndes third in a Ford.
Rick Kelly, another of the pre race favourites, also had a terrible start and has dropped back to ninth.