Homologation issues meant the Audi SQ2 didn’t reach Australia after its initial global release in 2018, which makes the sporty flagship an obvious highlight of a refreshed Q2 small SUV line-up.

The SQ2 arrives as the German brand’s most affordable performance SUV, priced from $64,400 to significantly undercut Audi’s next-up hot SUV, the RS Q3, by more than $25,000.

There appears to be no ‘SUV tax’, either, as the SQ2 costs virtually the same as the former, closely related S3 hatch that’s due to be replaced in late 2021.

It looks nothing like old or new S3s, mind. With the Q2 positioned as Audi’s most design-focused SUV, the SQ2 features the same heavily chiselled body.

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Naturally, the SQ2 looks the sportiest in the range, though not by a significant amount. The quad exhaust pipes are arguably its most purposeful visual enhancement, though the 19-inch Audi Sport rims are also exclusive to the range-topper (as are alternative gloss-black, blade-style wheels available for $1560).

Audi’s clever and fancy Matrix LED headlights are also standard, whereas optional on the regular Q2.

Metallic paint is also included in the SQ2’s price, following the outgoing S3 and unusual for a luxury car. Most colours are cost options on the regular Q2, for example.

Audi’s smallest SUV is one particularly benefitting of the ‘crossover’ description because it’s possible to tailor the exterior to look more like a hatchback or more like an SUV.

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The quad exhaust pipes are arguably the SQ2's most purposeful visual enhancement

Our Turbo Blue test car took the former approach, featuring matching lower bodywork and a C-pillar ‘blade’ in no-cost matching body colour (rather than standard silver). Pick Apple Green (as shown in this review) or Arrow Grey exterior colours, though, and your SQ2 comes with contrast dark grey for the lower body, wheelarches and rear pillar for the off-roader effect.

Inside isn’t quite as contemporary. The SQ2’s cabin is based on the A3/S3 dating back to 2013 rather than the upcoming generation.

It remains sufficiently stylish though, and perceived quality is mostly good with the odd aberration such as the plasticky vent surrounds and scratchy hard plastics on parts of the dash, centre console and rear doors.

The front doors at least benefit from a nicely textured microfibre panel. That’s shared with the mid-range Q2 40TFSI but the SQ2’s interior is further embellished with a dimpled, S-badged steering wheel, black cloth headlining, stainless steel pedals and illuminated inlays for the dash and console sides that can be switched between 10 colour choices (and look especially good at night).

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Nappa leather sports seats come in black and Magma red, or black with touches of grey for buyers looking for a more restrained colour scheme.

Heated front seats, a 705-watt, 14-speaker Bang & Olufsen audio system and the most driver aids in the range complete an impressive spread of equipment for the SQ2.

Options are limited to the wheels, sunroof, privacy glass and some styling touches.

Compare the SQ2 to its closest natural rival, the $67,900 BMW X2 M35i Pure, and the Audi’s value is reinforced.

Although the M35i Pure has electric front seats, 20-inch wheels and a larger infotainment display on its side, you need the more expensive, $72,900 M35i to get a (less powerful) big-name audio system and leather seats. It also adds a sunroof, though the M35i’s adaptive headlights are still less advanced than the SQ2's.

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Audi’s Virtual Cockpit digital instrument panel is another gain for the SQ2 over standard models and includes a variant-specific display featuring a central rev counter. A View button on the steering wheel allows the driver to alternative between different layouts, including an option for the sat-nav map to dominate the screen.

Rear legroom is acceptable for adults provided no-one particularly tall is occupying the front or rear seats, and headroom is decent. There’s no centre armrest or vents, though.

Boot space also falls into the fine-but-not-generous category. Audi quotes 405 litres, which is more than you’ll find in the S3 (old or upcoming) but less than the luggage capacity quoted for rivals such as the BMW X2 M35i (470L) or Mini Countryman JCW (450L).

The SQ2 follows Audi’s usual suspension formula for its S-badged models: lowered (by 20mm in this case) and featuring stiffened springs and dampers.

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Unlike the RSQ3, or even the last-of-the-line S3 featuring Magnaride, the SQ2’s dampers are passive rather than adaptive.

While this means a softer ride can’t be chosen via the Drive Select modes, the SQ2 strikes a well-judged balance between determined body control and low-speed cushioning.

It doesn’t roll along with noticeably greater firmness than a Q2 40TFSI Quattro fitted with optional 19s, the suspension doesn’t cause a fuss over potholes, and there’s none of the constant fidgeting around town that used to blight sporty Audis once upon a time.

Cycling through Drive Select does alter the characteristics of the drivetrain. Even in the relatively relaxed state of Comfort, though, there’s early encouragement from the SQ2’s combination of EA888 2.0-litre four-cylinder turbo and seven-speed dual-clutch auto. Throttle response is already sharper than that experienced in the mid-range Q2 40TFSI Quattro.

With 221kW and 400Nm, there’s an extra 8kW/20Nm over the tune used in the old S3 and VW Golf R but also a touch less power (7kW) than the upcoming S3 and lower outputs than the next-generation Golf R that has 235kW and 420Nm.

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While the SQ2 is slightly slower off the mark to 100km/h than both, a quoted 4.9 seconds places it joint top of the sporty-compact-SUV acceleration charts with the X2 M35i.

That puts it above the likes of the Mini Countryman JCW and more expensive Mercedes-AMG GLA35 (both 5.1sec) and ahead of the cheaper, forthcoming Hyundai Kona N (5.5 seconds, though front-wheel drive).

In-house, it trails the RSQ3 by four-tenths.

On an emotive level, the SQ2’s turbo four isn’t as characterful as its more expensive sibling’s warbly 2.5-litre turbo five-cylinder while also lacking its exhaust crackles. Yet get stuck into the throttle pedal and the 2.0-litre sounds suitably angry – encouraging the driver to strive for its 6500rpm redline in a lower gear despite the obvious mid-range grunt.

As ever, the quick-shifting nature of the VW Group’s seven-speed dual-clutch auto makes a natural alliance with a sporty engine, if still lacking the consistent smoothness of a torque converter transmission at a slower pace.

It’s no surprise the SQ2’s dynamics are in the same ballpark as the closely related S3 of old, and, though you’re sitting higher, the behind-the-wheel experience is also more akin to that of a hatchback than an SUV.

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There’s a touch more body roll than an S3 but also noticeably less lean than you get in Audi’s SQ5 mid-sized performance SUV.

The SQ2’s steering isn’t chatty but it’s fairly quick and certainly accurate. There’s also some extra, welcome weight to the rack in Dynamic mode, which just about avoids feeling artificial and overall contributes to confidence that the SQ2 will go where you point it.

Compact dimensions of just 4.2 metres in length and a circa-1.5-tonne kerb weight little heavier than an S3 aid both the SQ2’s speed and agility.

And while the SQ2 isn’t an especially involving vehicle to steer, surefooted handling via the taut chassis, Haldex all-wheel-drive system and grippy 19-inch, 235/40 Bridgestone Turanzas means you can enjoy some slightly daft cornering speeds.

The Audi’s brakes are also excellent – strong and easy to modulate.

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For buyers who appreciate bang for their buck even well above a typical hot hatch price point, the SQ2’s price-to-power ratio beats all Audi performance SUVs.

Where the SQ7/SQ8 twins set buyers back more than $500 for each kilowatt, for example, the SQ2 is a relative bargain by asking only $291 for each of its kilowatts.

The RSQ3 is next on the power-value list at $306 per kW, though for families who can afford its $89,900 starting price, they do get a stronger combination of interior practicality and performance.

Among its competitive set, however, the SQ2 is certainly well equipped for the fight with its punchy performance and heavily laden features list.