Kiwi Hayden Paddon and world champion Sebastien Ogier had their victory hopes dashed on a dramatic final day of the Rally Australia at Coffs Harbour in northern New South Wales yesterday.

Andreas Mikkelsen completed a Volkswagen one-two at the powerhouse team's last World Rally Championship event, beating home teammate Ogier by 14.9 seconds.

However, the team missed out on their fourth consecutive one-two in the drivers' championship, after Hyundai's Thierry Neuville finished Australia's 23 stages in third place to clinch the runners-up title.

"Its been such a perfect end to the season," Mikkelsen said

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"Coming here I had nothing to lose. During all this year I really drove for the championship, but coming here I just went for the win."

The event is the Volkswagen team's last, after the organisation shocked the sport earlier this month by announcing their departure following the brand's emissions scandal.

The race was delayed on the 21st stage for almost half hour when Eric Camilli rolled his M-Sport vehicle on to its side and then its roof, before a small fire broke out in the car.

He was retired from the stage but appeared unhurt.

Mikkelsen started the day just two seconds clear of Ogier. That gap was then extended on the first stage of the day, before the Frenchman spun on the 20th stage, costing him 19.6 seconds in the race for the lead and virtually handing the rally to his teammate.

"I've never driven so fast and felt so comfortable," Mikkelsen said. "Now I'm not driving crazy but setting good times. It is really coming together."

Ogier also would have dropped out of the top two if not for a puncture suffered by then-third placed Paddon.

The Kiwi suffered external damage on his Hyundai and shredded his left rear after going wide on a turn, costing him 73 seconds and bumping him back to fifth place.

"We went wide, touched a bank and knocked the tyre off the rim," Paddon said. He recovered to finish fourth.

Mikkelsen dominated the rally, leading the overall standings after all but one stage and overcoming a bizarre incident on Saturday when his clutch become stuck on his brake pedal midway through a stage.

- AAP