The 26-year old was 10th after the first run down the 1.2 kilometre course, but improved markedly on run two, improving her time by nearly four tenths of a second, and taking the second fastest time.
This moved her into a three-way tie for fourth place, her best finish in an FIBT Skeleton World Cup event.
"Today was a super tight race with everybody stacked after the first heat," Steele said. "It was so close we had a three-way tie for fourth place.
"I'm happy with my form leading into the World Championships in St. Moritz."
Fellow Australian Institute of Sport scholarship holder, Lucy Chaffer, had a disappointing day, finishing in 13th place after being 11th after the first run.
"I was hoping for a better result, but I didn't push very well and corner nine was a problem for me today," Chaffer said.
"I'm looking forward to a week off before St. Moritz and the World Championships."
In ideal conditions, Junior World Champion, Russia's Elena Nikitina, won the event by almost three tenths of a second from the USA's Noelle Pikus-Pace, with Russian Maria Orlova in third place.
Then followed Steele, equal with Austria's Janine Flock and Canada's Sarah Reid.
Head coach of the Australian team, Eric Bernotas, was pleased with the performance of his athletes ahead of the World Championships in a fortnight's time.
"It was a very strong performance by Lucy and Michelle," Bernotas said.
"I am very pleased with the level they have taken, both their preparedness and their confidence. With continued teamwork and effort, I am confident in a continued improvement in performance."
In the World Cup standings, German Marion Thees continues to lead, despite a poor performance in Austria, 12 points clear of compatriot Anja Huber. Canadian Sarah Reid is third.
Lucy Chaffer still holds down ninth place in the title race, with Michelle Steele making up ground to be 11th, only eight points outside the top 10.
In the women's bobsled event, Australia's Astrid Radjenovic and Jana Pittman finished in 17th place.