It's been dubbed the Tay Tay tax - a $1 levy on big concerts by artists such as Taylor Swift.
Conservative estimates show it could raise about $12 million a year to support Australian live music, an inquiry has been told.
"I think it would be a terrific thing for the industry, and almost everyone I speak to gives me feedback that it will be a great success," Live Music Council of Australia chair Howard Adams said.
Mr Adams gave evidence in Canberra on Friday at a parliamentary inquiry into a crisis in the live music scene.
Festivals are struggling to survive or are cancelled, and venues are closing down as costs skyrocket, the inquiry has been told.
One idea that's had broad backing is a levy on arena shows that would go back into grassroots music.
It would be added to the production costs of shows with an audience of more than 5000 people, with the cost split between promoters, artists, venues and consumers, Adams said.
The money would be held by a charitable trust and used to fund fast-turnaround grants of up to $15,000 for grassroots live music venues.
But the plan needed industry-wide backing to succeed, Adams said.
"It can't just be small venues that are running it," he said.
"Nor can it just be Live Nation that's running it.
"It's got to be everybody."
Venues would need to be pre-approved to access the money, and regional towns might need a broader definition of what constituted a live music venue, Adams said.
But the plan would not need to be endorsed by parliament as it was effectively a user-pays model, he said.
"We seem to be making headway and it's not just noise," Adams said.
"Who knows, this could become the norm internationally, and it would be wonderful if it could."
The hearing was also told on Friday that if punters and performers stopped risky behaviours such as stage diving, live music events would be easier to insure.
The live music scene is predominantly insured through international companies, with the federal government's arts envoy Susan Templeman questioning if Australian insurance companies had abandoned the live music sector.
The inquiry has already held more than a dozen hearings around Australia, with evidence a national strategy is needed to rescue the industry.
