By early 1942, the Japanese had entered the war, and the Australian government decided to bring some of its troops from the Middle East back to Australia to bolster its defences. The 2/16th embarked at the end of January 1942, and returned to Australia, landing at Adelaide in March 1942 after a brief stopover in Fremantle. A period of reorganisation followed as they were prepared for the hardships of jungle warfare, during which time Potts handed over command of the battalion to Lieutenant Colonel Albert Caro; however, the situation in the Pacific at the time was desperate for the Australians, following Japanese victories in Malaya, Singapore, Rabaul and Ambon, and fighting on the Kokoda Track, and so the 2nd AIF troops returning from the Middle East had very little time to prepare for their next campaign. The 2/16th arrived in New Guinea, landing in Port Moresby in mid-August 1942. Later that month it was committed to the battle, and joined the fighting retreat down the Kokoda Track, being rushed into the line around Alola to fill a gap after the 53rd Battalion fell back from Isurava. At the Battle of Mission Ridge in early September it suffered heavy casualties after being encircled by the Japanese and conducting a fighting withdrawal to Imita Ridge. Following its relief in the middle of September, the battalion's surviving members were joined with those from the 2/14th Battalion to form a composite unit temporarily, as the battalion suffered so many casualties in the retreat that it was down to an effective strength of about 200 men; the 2/14th had also suffered heavily.