The tall paceman has been conspicuous by his absence, with the 24-year-old the only player in the 17-man Ashes squad not to be used during the 5-0 whitewash.
Finn did not feature in the opening one-day international defeat to Australia and was once again kicking his heels on the sidelines in the tour match against a Prime Minister's XI on Tuesday.
There have been several rumours Finn has regressed in recent months and the England and Wales Cricket Board confirmed in a statement that the Middlesex man will miss the remaining four ODIs and three Twenty20 matches Down Under.
England ODI and T20 head coach Ashley Giles said: "Steven is one of our most talented bowling assets who has played and will continue to play an important role for England.
"He has been working hard over the last couple of months on technical aspects of his bowling and Steven and the coaches all feel continuing this work out of the performance environment will be beneficial for him."
Giles believes Finn would be best served by taking a complete break from cricket for a few weeks, and admitted he was "not selectable" at present.
"Sometimes through your career you go through those ups and downs and his timing is out," he said.
"That then can affect your confidence and certainly it is not coming out as quickly as he would like either.
"I suppose he has been in this state for at least a couple of months and it hasn't worked.
"We feel now that it is best to take him out of it. Sometimes you do have to do that, you take guys back.
"At the moment Steven needs a bit of space in the very short term he probably needs a couple of weeks away from cricket full stop.
"Steven is not selectable at the moment."
The quick is set to return home in the next couple of days and England do not intend to call up a replacement for the remainder of the one-day international series, which resumes in Brisbane on Friday.
England may opt to bring in a new name for the three-match Twenty20 series which follows.
Giles said contact had already been made with Finn's county side Middlesex to begin a regime once he returns from a break.
"He can go back and work on the technical things he has got to work on," he said.
"We've already had communication with Middlesex and we need to make a plan and get Steven back as quickly as we can."
Finn's form problems have come since he was forced to remodel his action after he frequently hit the stumps with his hands during his bowling action.
That became a hot topic during South Africa's tour to England in 2012, when the Proteas batsmen claimed it was a distraction.
As a result, any time a bowler now flicks the stumps in their action - described as 'Finning' - the delivery is deemed a no-ball.
That has been a factor in the remodelling of Finn bowling action and, while he has seemingly regressed since, Giles denied different coaching voices had prompted his current issues.
"The important thing to say is that whichever coach has been working with him, be it at Middlesex or England, we've only got the interests of Steven Finn at heart in getting him back bowling as well as he can," he said.
Finn was included in England's provisional 30-man squad for the World Twenty20 which is due to be staged in Bangladesh and begins on March 16.
A final 15-man squad is set to be confirmed early next month, following the Twenty20 series in Australia.