Need help understanding ITAA97 S118.10, which implies if a property is leased/rented at sale date then there will be no relief under the main residence exemption should you latter move in then rent out the property again at a later date?

Interesting question Jason.
Can't say I have heard this one before, but have always believed that the ATO pro-rata the time a property is held into that period when it was rented out and the period it was someone's primary residence.
Without doubt you would be best advised by a chartered accountant who could provide a professional opinion.

Hi Jason,
The capital gain on a property that is both the primary place of residence and also made available for rent is calculated against the increase in value during that time which it was used to earn an income.
As Stephen said a good accountant will give you all of the considerations, one would be to have the property professionally valued at each time that the purpose changed and also having a depreciation schedule completed at the time that you choose to rent the property.
Best of luck
Regards
Scott