Paddon won Heat 1 of the rally on Saturday and went into Sunday with a 30-second lead over Lewis Bates and Anthony McLoughlin.
However, that was all undone on the first run through the 9km Bald Millpost stage when Paddon struck a kangaroo.
“Unfortunately it’s kangaroo 1, rally car 0 this morning,” Paddon wrote on social media.
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“Nothing we could do at 160kmph with a bunch crossing the road. Unfortunately, this is rally sometimes.
“We will try to make repairs to get back out for the power stage this afternoon.”
With Paddon out of contention, Bates shot into the lead with a 59-second advantage over Scott Pedder by the end of SS9. Alex Rullo has come up to third, albeit nearly nine minutes adrift.
