Protecting headwater streams is essential to minimise downstream sediment loads to rivers, estuaries, and oceans. This study analyses the gully and sheet erosion risk from a 33,000 ha agricultural development proposal in the Normanby catchment draining to the Great Barrier Reef (GBR) Lagoon, Australia. The slope‐area threshold for channel initiation was assessed for existing gully channel head locations using satellite images and a hydrologically enforced digital elevation model (SRTM). Thresholds were used to predict whether other stream lines (1:25k scale) were prone to gully incision under development. Results indicated that 430 km out of 1,200 km of streams were at risk of gullying, which could increase erosion by 2‐times, delivering 7,500 t yr−1 locally and 1,700 t yr−1 (worth A$1.8 million) to the GBR. Sheet erosion under agriculture is estimated (RUSLE) to increase by 13‐times from 0.12 to 1.5 t ha−1 yr−1, with 2,200 t yr−1 to streams and 900 t yr−1 (worth A$1 million) to the GBR. Buffering (±50 m) 560 km of headwater streams would cover 5,600 ha or 17% of the area. Precision agriculture using higher resolution topographic data (LiDAR) and improved slope‐area thresholds for gully erosion should be a minimum prerequisite for development, which would reduce but not eliminate increased sediment loads to the GBR. Forest clearance for agriculture is ongoing in Australia, but this first‐world country does not have effective policies or regulations to protect headwater streams or cumulative impacts to the World Heritage Great Barrier Reef, despite millions of dollars spent annually to reduce past land degradation.