Manxman won last Commonwealth medal
The 28-year-old Manxman won the Island's only medal at the Glasgow games in 2014, a silver in the 40km points race.
He said: ‘Unfortunately I won't be able to compete at the Commonwealth Games as they clash with the Ardennes Classics which are races I am targeting this season.
"I wish all my (Isle of Man) team mates the best of luck and I'm sure they will bring home some medals.’
Isle of Man team manager Trevor Taubman added: ‘We fully understand Pete's position.
"The start of the professional cycling calendar coincides with the Games in Australia so these clashes are inevitable. We fully support Peter and wish him every success.’
Kennaugh is also taking part in next week’s Tour Down Under.
The six-stage race starts on 16 January.