Commercial radio stations should play a minimum of 25% Australian music during peak times, a new government report has recommended.

The parliamentary report into the Australian music industry, released on Tuesday, has called for clearer and simpler rules around Australian content, and an overall boost to Australian music quotas.

Existing quotas were poorly understood, rarely enforced and some stations only played Australian music during unpopular late-night hours, the inquiry heard. One submission said a young music director was incorrectly under the impression a Justin Bieber song was “Australian content because it was produced in Melbourne”.

Currently, the Australian music quota varies depending on how the station is classified by the Australian Communications and Media Authority (Acma).

Mainstream rock, contemporary hits, top 40 and alternative stations already have a 25% quota.

But “mainstream adult contemporary” and classic rock stations have a 20% quota; “soft adult contemporary” and “hits and memories” stations have a 15% quota; and “easy listening” channels have 10%.

In comparison, Triple J has a self-imposed 40% Australian music quota.

The inquiry heard that the difference between “classic rock” (20%), “gold – classic hits” (15%) and “easy gold” (10%) was unclear and “not defined anywhere within the code”.

The report recommended the quota system be reformed so that all commercial stations have a default 25% quota, between the prime times of 6am and 6pm.

Stations that would struggle – such as classics or jazz channels – could be exempted on a case-by-case basis and given a lower quota.

It also recommended that stations which play new music (less than 12 months old), must also have a quota that 25% of their Australian music is new.

The report also shed light on the growth of music-streaming services in Australia, which has soared from 38% market share in 2016 to 67% share in 2018. Recording artists told the inquiry the streaming boom was hitting artist revenue due to the lower payment rates they generally offer.

The Association of Australian Musicians told the inquiry: “Spotify’s micro royalty payments ($0.002 per play) have put many musicians out of business.”

The industry body, Commercial Radio Australia, told the inquiry radio stations mostly reached and even exceeded the current quotas.

However, it admitted there was widespread confusion over what was defined as Australian music, saying “everybody was working on a different definition”.

CRA said it had developed a definition in association with Aria that “Australian music” applied to an Australian main artist, featured artist or a band that was 50% or more Australian citizens or residents.

Music did not qualify as Australian if it was produced by an Australian citizen or resident, was written by an Australian (without being performed by an Australian) or was recorded in Australia.

According to CRA, many stations were counting composers, writers and producers when judging Australian content.

The inquiry also recommended the government remove the existing cap on music license fees paid by radio stations. Currently, stations must pay license fees to record labels in order to play their music, with the fees being distributed to the label and artist.

But the total amount of fees paid by the radio station cannot be more than 1% of their earnings.

The Australian Independent Record Labels Association told the inquiry this cap was too low and “operates as an inhibiting factor to the development of Australian media”.

Responding to the report, CRA said it opposed the proposed new quotas.

The chief executive, Joan Warner, said the stations “do not accept them as a way forward”.

“They will invariably result in more regulation of local radio stations while the internet and music-streaming services remain, to all intents and purposes, regulation free.”