Playing in the third group of the morning wave in ideal scoring conditions on Thursday, the world number two roared out of the blocks with six straight birdies from the par-four 10th.
The reigning US Masters champion battled his swing midway through his blistering round and made eight straight pars before storming home with four consecutive birdies to smash the course record by three shots.
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"I felt like there's been a good round in me for four weeks and finally I threw it out there today," Scott said.
"The swing is a bit of hard work for me at the moment. I can still hit good shots obviously but hitting a few average ones as well and I got away with the bad ones with some good saves.
"... But it was a great start and it's a very nice little course record to have here at Royal Sydney."
Yip, who plies his trade on the One Asia Tour, also made the most of the favourable morning conditions, firing a seven-under-par 65 to equal the old course record.
Kim fired the low round of the afternoon groups, storming up the leaderboard with five birdies in six holes on the back-nine to share second spot with Yip.
Veteran Victorian David McKenzie also took advantage of the morning conditions, carding a six-under 66 to sit in outright fourth.
Two-time Stonehaven Cup winner Aaron Baddeley is a further shot back after returning to form with a five-under 67 to sit alongside Jason Norris, Jason Scrivener and Alistair Presnell.
Western Australia amateur Brady Watt fired a 68 to be among a cluster of players at four under including Matt Jones.
Jones beat playing partner Rory McIlroy by one shot as the Northern Irishman started his maiden Australian Open campaign with a three-under 69.
The world number six was impressive from tee-to-green in the tricky afternoon conditions but missed four short putts to trail Scott by seven shots.
Jason Day and Kevin Streelman, who played alongside Scott, are among a group of golfers at two-under par after posting opening 70s.
Defending champion Peter Senior has his work cut out to make the cut after a two-over 74, while 2010 winner Geoff Ogilvy battled to a disappointing 75 playing alongside McIlroy.
It was a disastrous day for Kim Felton who posted a three-under 69 but was disqualified for signing an incorrect scorecard.