The 24 year old had emerged as one of the clubs top targets, as he looks to further his attacking options ahead of their return to the top flight.
A fee had been agreed between the Tigers and Burley, though manager Steve Bruce will have to look elsewhere following complications during the former Swindon Town man’s physical assessment.
Austin has made ninety appearances for the Clarets since signing in January 2011, scoring forty-five times.
However, despite just missing a handful of games over the last two years, scans revealed a lasting problem, potentially with his shoulder, which he has dislocated three times since 2010.
Swansea City forward Luke Moore, West Bromwich Albion’s Peter Odemwinge and South African forward Katlego Mphela have also been linked with a move to the KC Stadium in recent weeks, and they may all be revisited following Tuesday’s revelations.