diff --git a/packages/app/src/components/worktree-setup-callout-policy.test.ts b/packages/app/src/components/worktree-setup-callout-policy.test.ts
new file mode 100644
index 000000000..03257be24
--- /dev/null
+++ b/packages/app/src/components/worktree-setup-callout-policy.test.ts
@@ -0,0 +1,103 @@
+import { describe, expect, it } from "vitest";
+import {
+  buildWorktreeSetupCalloutPolicy,
+  selectActiveGitWorkspaceProject,
+  shouldShowWorktreeSetupCallout,
+  type WorktreeSetupWorkspaceInput,
+} from "./worktree-setup-callout-policy";
+
+function gitWorkspace(
+  overrides: Partial<WorktreeSetupWorkspaceInput> = {},
+): WorktreeSetupWorkspaceInput {
+  return {
+    projectId: "project-1",
+    projectKind: "git",
+    projectRootPath: "/repo/project-1",
+    project: { checkout: { mainRepoRoot: "/repo/main-project-1" } },
+    ...overrides,
+  };
+}
+
+describe("selectActiveGitWorkspaceProject", () => {
+  it("selects the active git workspace project from checkout metadata", () => {
+    expect(selectActiveGitWorkspaceProject("server-1", gitWorkspace())).toEqual({
+      serverId: "server-1",
+      projectKey: "project-1",
+      repoRoot: "/repo/main-project-1",
+    });
+  });
+
+  it("falls back to the workspace project root when checkout metadata has no main root", () => {
+    expect(
+      selectActiveGitWorkspaceProject(
+        "server-1",
+        gitWorkspace({ project: { checkout: { mainRepoRoot: null } } }),
+      ),
+    ).toEqual({
+      serverId: "server-1",
+      projectKey: "project-1",
+      repoRoot: "/repo/project-1",
+    });
+  });
+
+  it("ignores non-git workspaces and blank project coordinates", () => {
+    expect(
+      selectActiveGitWorkspaceProject("server-1", gitWorkspace({ projectKind: "local" })),
+    ).toBe(null);
+    expect(selectActiveGitWorkspaceProject("server-1", gitWorkspace({ projectId: " " }))).toBe(
+      null,
+    );
+    expect(
+      selectActiveGitWorkspaceProject(
+        "server-1",
+        gitWorkspace({ projectRootPath: " ", project: null }),
+      ),
+    ).toBe(null);
+  });
+});
+
+describe("shouldShowWorktreeSetupCallout", () => {
+  it("shows the callout when paseo config was read and setup commands are missing", () => {
+    expect(shouldShowWorktreeSetupCallout({ ok: true, config: {} })).toBe(true);
+    expect(shouldShowWorktreeSetupCallout({ ok: true, config: null })).toBe(true);
+  });
+
+  it("does not show the callout when setup commands are present", () => {
+    expect(
+      shouldShowWorktreeSetupCallout({ ok: true, config: { worktree: { setup: "npm install" } } }),
+    ).toBe(false);
+    expect(
+      shouldShowWorktreeSetupCallout({
+        ok: true,
+        config: { worktree: { setup: [" ", "npm install"] } },
+      }),
+    ).toBe(false);
+  });
+
+  it("does not show the callout when reading paseo config fails or has not completed", () => {
+    expect(shouldShowWorktreeSetupCallout(undefined)).toBe(false);
+    expect(shouldShowWorktreeSetupCallout({ ok: false })).toBe(false);
+  });
+});
+
+describe("buildWorktreeSetupCalloutPolicy", () => {
+  it("builds the stable sidebar callout identity and action route", () => {
+    expect(
+      buildWorktreeSetupCalloutPolicy({
+        serverId: "server-1",
+        projectKey: "project-1",
+        repoRoot: "/repo/project-1",
+      }),
+    ).toEqual({
+      id: "worktree-setup-missing:project-1",
+      dismissalKey: "worktree-setup-missing:project-1",
+      priority: 100,
+      title: "Set up worktree scripts",
+      description:
+        "Add setup commands so new worktrees can install dependencies and prepare themselves automatically.",
+      actionLabel: "Open project settings",
+      projectSettingsRoute: "/settings/projects/project-1",
+      testID: "worktree-setup-callout-project-1",
+    });
+  });
+});
diff --git a/packages/app/src/components/worktree-setup-callout-policy.ts b/packages/app/src/components/worktree-setup-callout-policy.ts
new file mode 100644
index 000000000..fc3dd6211
--- /dev/null
+++ b/packages/app/src/components/worktree-setup-callout-policy.ts
@@ -0,0 +1,85 @@
+import type { PaseoConfigRaw } from "@server/shared/messages";
+import { buildProjectSettingsRoute } from "@/utils/host-routes";
+
+export interface WorktreeSetupWorkspaceInput {
+  projectId: string;
+  projectKind: string;
+  projectRootPath: string;
+  project?: {
+    checkout?: {
+      mainRepoRoot?: string | null;
+    } | null;
+  } | null;
+}
+
+export interface ActiveGitWorkspaceProject {
+  serverId: string;
+  projectKey: string;
+  repoRoot: string;
+}
+
+interface ReadProjectConfigResult {
+  ok: boolean;
+  config?: PaseoConfigRaw | null;
+}
+
+export interface WorktreeSetupCalloutPolicy {
+  id: string;
+  dismissalKey: string;
+  priority: number;
+  title: string;
+  description: string;
+  actionLabel: string;
+  projectSettingsRoute: string;
+  testID: string;
+}
+
+export function selectActiveGitWorkspaceProject(
+  serverId: string,
+  workspace: WorktreeSetupWorkspaceInput,
+): ActiveGitWorkspaceProject | null {
+  if (workspace.projectKind !== "git") {
+    return null;
+  }
+
+  const projectKey = workspace.projectId.trim();
+  const repoRoot = (workspace.project?.checkout?.mainRepoRoot ?? workspace.projectRootPath).trim();
+  if (!projectKey || !repoRoot) {
+    return null;
+  }
+
+  return { serverId, projectKey, repoRoot };
+}
+
+export function shouldShowWorktreeSetupCallout(readResult: ReadProjectConfigResult | undefined) {
+  return readResult?.ok === true && !hasSetupCommands(readResult.config ?? {});
+}
+
+export function buildWorktreeSetupCalloutPolicy(
+  project: ActiveGitWorkspaceProject,
+): WorktreeSetupCalloutPolicy {
+  const calloutKey = `worktree-setup-missing:${project.projectKey}`;
+
+  return {
+    id: calloutKey,
+    dismissalKey: calloutKey,
+    priority: 100,
+    title: "Set up worktree scripts",
+    description:
+      "Add setup commands so new worktrees can install dependencies and prepare themselves automatically.",
+    actionLabel: "Open project settings",
+    projectSettingsRoute: buildProjectSettingsRoute(project.projectKey),
+    testID: `worktree-setup-callout-${project.projectKey}`,
+  };
+}
+
+function hasSetupCommands(config: PaseoConfigRaw): boolean {
+  const setup = config.worktree?.setup;
+  if (typeof setup === "string") {
+    return setup.trim().length > 0;
+  }
+  if (Array.isArray(setup)) {
+    return setup.some((command) => typeof command === "string" && command.trim().length > 0);
+  }
+  return false;
+}
diff --git a/packages/app/src/components/worktree-setup-callout-source.test.tsx b/packages/app/src/components/worktree-setup-callout-source.test.tsx
deleted file mode 100644
index b2f1431fe..000000000
--- a/packages/app/src/components/worktree-setup-callout-source.test.tsx
+++ /dev/null
@@ -1,279 +0,0 @@
-/**
- * @vitest-environment jsdom
- */
-import { QueryClient, QueryClientProvider } from "@tanstack/react-query";
-import React, { act } from "react";
-import { createRoot, type Root } from "react-dom/client";
-import { afterEach, beforeEach, describe, expect, it, vi } from "vitest";
-import { SidebarCalloutProvider } from "@/contexts/sidebar-callout-context";
-import { SidebarCalloutSlot } from "./sidebar-callout-slot";
-
-const { theme } = vi.hoisted(() => ({
-  theme: {
-    spacing: { 0: 0, 1: 4, 2: 8, 3: 12, 4: 16 },
-    borderWidth: { 1: 1 },
-    borderRadius: { md: 6 },
-    fontSize: { xs: 11, sm: 13 },
-    fontWeight: { medium: "500", semibold: "600" },
-    colors: {
-      surface0: "#000",
-      foreground: "#fff",
-      foregroundMuted: "#aaa",
-      border: "#555",
-      destructive: "#f44",
-    },
-  },
-}));
-
-const asyncStorage = vi.hoisted(() => ({
-  values: new Map<string, string>(),
-  getItem: vi.fn(async (key: string) => asyncStorage.values.get(key) ?? null),
-  setItem: vi.fn(async (key: string, value: string) => {
-    asyncStorage.values.set(key, value);
-  }),
-}));
-
-const router = vi.hoisted(() => ({
-  navigate: vi.fn(),
-}));
-
-const activeSelection = vi.hoisted(() => ({
-  value: { serverId: "server-1", workspaceId: "workspace-1" } as {
-    serverId: string;
-    workspaceId: string;
-  } | null,
-}));
-
-const activeWorkspace = vi.hoisted(() => ({
-  value: {
-    id: "workspace-1",
-    projectId: "project-1",
-    projectKind: "git",
-    projectRootPath: "/repo/project-1",
-    project: { checkout: { mainRepoRoot: "/repo/project-1" } },
-  } as Record<string, unknown> | null,
-}));
-
-const client = vi.hoisted(() => ({
-  readProjectConfig: vi.fn(),
-}));
-
-vi.mock("@react-native-async-storage/async-storage", () => ({
-  default: asyncStorage,
-}));
-
-vi.mock("expo-router", () => ({
-  useRouter: () => router,
-}));
-
-vi.mock("@/stores/navigation-active-workspace-store", () => ({
-  useActiveWorkspaceSelection: () => activeSelection.value,
-}));
-
-vi.mock("@/stores/session-store-hooks", () => ({
-  useWorkspaceFields: (
-    serverId: string | null,
-    workspaceId: string | null,
-    project: (workspace: Record<string, unknown>) => unknown,
-  ) => {
-    if (
-      !activeWorkspace.value ||
-      serverId !== activeSelection.value?.serverId ||
-      workspaceId !== activeWorkspace.value.id
-    ) {
-      return null;
-    }
-    return project(activeWorkspace.value);
-  },
-}));
-
-vi.mock("@/runtime/host-runtime", () => ({
-  useHostRuntimeClient: (serverId: string) => (serverId === "server-1" ? client : null),
-}));
-
-vi.mock("react-native-unistyles", () => ({
-  StyleSheet: {
-    create: (factory: unknown) =>
-      typeof factory === "function" ? (factory as (t: typeof theme) => unknown)(theme) : factory,
-  },
-  useUnistyles: () => ({ theme }),
-}));
-
-vi.mock("lucide-react-native", () => {
-  const X = (props: Record<string, unknown>) => React.createElement("span", props);
-  return { X };
-});
-
-vi.stubGlobal("React", React);
-vi.stubGlobal("IS_REACT_ACT_ENVIRONMENT", true);
-
-import { WorktreeSetupCalloutSource } from "./worktree-setup-callout-source";
-
-function readOk(config: Record<string, unknown>) {
-  return {
-    ok: true,
-    config,
-    revision: { exists: true, mtimeMs: 1, size: 2 },
-  };
-}
-
-function readError() {
-  return {
-    ok: false,
-    error: { code: "project_not_found", message: "Project not found" },
-  };
-}
-
-function Harness({ queryClient }: { queryClient: QueryClient }) {
-  return (
-    <QueryClientProvider client={queryClient}>
-      <SidebarCalloutProvider>
-        <WorktreeSetupCalloutSource />
-        <SidebarCalloutSlot />
-      </SidebarCalloutProvider>
-    </QueryClientProvider>
-  );
-}
-
-async function renderHarness(root: Root, queryClient: QueryClient): Promise<void> {
-  await act(async () => {
-    root.render(<Harness queryClient={queryClient} />);
-    for (let index = 0; index < 5; index += 1) {
-      await Promise.resolve();
-      await new Promise((resolve) => setTimeout(resolve, 0));
-    }
-  });
-}
-
-async function findByTestId(testID: string): Promise<HTMLElement | null> {
-  let element: HTMLElement | null = null;
-  for (let index = 0; index < 10 && !element; index += 1) {
-    await act(async () => {
-      await Promise.resolve();
-      await new Promise((resolve) => setTimeout(resolve, 0));
-    });
-    element = document.querySelector(`[data-testid="${testID}"]`) as HTMLElement | null;
-  }
-  return element;
-}
-
-describe("WorktreeSetupCalloutSource", () => {
-  let root: Root | null = null;
-  let container: HTMLElement | null = null;
-  let queryClient: QueryClient | null = null;
-
-  beforeEach(() => {
-    activeSelection.value = { serverId: "server-1", workspaceId: "workspace-1" };
-    activeWorkspace.value = {
-      id: "workspace-1",
-      projectId: "project-1",
-      projectKind: "git",
-      projectRootPath: "/repo/project-1",
-      project: { checkout: { mainRepoRoot: "/repo/project-1" } },
-    };
-    client.readProjectConfig.mockReset();
-    client.readProjectConfig.mockResolvedValue(readOk({}));
-    router.navigate.mockClear();
-    asyncStorage.values.clear();
-    asyncStorage.getItem.mockClear();
-    asyncStorage.setItem.mockClear();
-    queryClient = new QueryClient({
-      defaultOptions: { queries: { retry: false } },
-    });
-    container = document.createElement("div");
-    document.body.appendChild(container);
-    root = createRoot(container);
-  });
-
-  afterEach(async () => {
-    if (root) {
-      await act(async () => {
-        root?.unmount();
-        await Promise.resolve();
-      });
-    }
-    queryClient?.clear();
-    queryClient = null;
-    root = null;
-    container?.remove();
-    container = null;
-  });
-
-  it("registers a callout for an active git workspace with missing setup", async () => {
-    await renderHarness(root!, queryClient!);
-
-    expect(await findByTestId("worktree-setup-callout-project-1")).not.toBeNull();
-    expect(container?.textContent).toContain("Set up worktree scripts");
-    expect(container?.textContent).toContain("Open project settings");
-    expect(client.readProjectConfig).toHaveBeenCalledWith("/repo/project-1");
-  });
-
-  it("does not register a callout for a non-git workspace", async () => {
-    activeWorkspace.value = {
-      id: "workspace-1",
-      projectId: "project-1",
-      projectKind: "local",
-      projectRootPath: "/repo/project-1",
-    };
-
-    await renderHarness(root!, queryClient!);
-
-    expect(container?.querySelector('[data-testid="worktree-setup-callout-project-1"]')).toBeNull();
-    expect(client.readProjectConfig).not.toHaveBeenCalled();
-  });
-
-  it("does not register a callout when setup is present", async () => {
-    client.readProjectConfig.mockResolvedValue(readOk({ worktree: { setup: "npm install" } }));
-
-    await renderHarness(root!, queryClient!);
-
-    expect(container?.querySelector('[data-testid="worktree-setup-callout-project-1"]')).toBeNull();
-  });
-
-  it("does not register a callout without an active workspace", async () => {
-    activeSelection.value = null;
-
-    await renderHarness(root!, queryClient!);
-
-    expect(container?.querySelector('[data-testid="worktree-setup-callout-project-1"]')).toBeNull();
-    expect(client.readProjectConfig).not.toHaveBeenCalled();
-  });
-
-  it("does not register a callout when reading paseo.json fails", async () => {
-    client.readProjectConfig.mockResolvedValue(readError());
-
-    await renderHarness(root!, queryClient!);
-
-    expect(container?.querySelector('[data-testid="worktree-setup-callout-project-1"]')).toBeNull();
-  });
-
-  it("opens project settings from the callout action", async () => {
-    await renderHarness(root!, queryClient!);
-
-    const action = await findByTestId("worktree-setup-callout-project-1-action-0");
-    expect(action).not.toBeNull();
-
-    act(() => {
-      action?.dispatchEvent(new MouseEvent("click", { bubbles: true }));
-    });
-
-    expect(router.navigate).toHaveBeenCalledWith("/settings/projects/project-1");
-  });
-
-  it("persists dismissal for the project", async () => {
-    await renderHarness(root!, queryClient!);
-
-    const dismiss = await findByTestId("worktree-setup-callout-project-1-dismiss");
-    expect(dismiss).not.toBeNull();
-
-    act(() => {
-      dismiss?.dispatchEvent(new MouseEvent("click", { bubbles: true }));
-    });
-
-    expect(asyncStorage.setItem).toHaveBeenCalledWith(
-      "@paseo:sidebar-callout-dismissals",
-      JSON.stringify(["worktree-setup-missing:project-1"]),
-    );
-    expect(container?.querySelector('[data-testid="worktree-setup-callout-project-1"]')).toBeNull();
-  });
-});
diff --git a/packages/app/src/components/worktree-setup-callout-source.tsx b/packages/app/src/components/worktree-setup-callout-source.tsx
index 45fc49e0e..2cba8dfe6 100644
--- a/packages/app/src/components/worktree-setup-callout-source.tsx
+++ b/packages/app/src/components/worktree-setup-callout-source.tsx
@@ -1,48 +1,16 @@
 import { useQuery } from "@tanstack/react-query";
-import type { PaseoConfigRaw } from "@server/shared/messages";
 import { useRouter } from "expo-router";
-import { useEffect } from "react";
+import { useEffect, useMemo } from "react";
 import { useSidebarCallouts } from "@/contexts/sidebar-callout-context";
 import { useStableEvent } from "@/hooks/use-stable-event";
 import { useHostRuntimeClient } from "@/runtime/host-runtime";
 import { useActiveWorkspaceSelection } from "@/stores/navigation-active-workspace-store";
 import { useWorkspaceFields } from "@/stores/session-store-hooks";
-import type { WorkspaceDescriptor } from "@/stores/session-store";
-import { buildProjectSettingsRoute } from "@/utils/host-routes";
-
-interface ActiveGitWorkspaceProject {
-  serverId: string;
-  projectKey: string;
-  repoRoot: string;
-}
-
-function selectActiveGitWorkspaceProject(
-  serverId: string,
-  workspace: WorkspaceDescriptor,
-): ActiveGitWorkspaceProject | null {
-  if (workspace.projectKind !== "git") {
-    return null;
-  }
-
-  const projectKey = workspace.projectId.trim();
-  const repoRoot = (workspace.project?.checkout.mainRepoRoot ?? workspace.projectRootPath).trim();
-  if (!projectKey || !repoRoot) {
-    return null;
-  }
-
-  return { serverId, projectKey, repoRoot };
-}
-
-function hasSetupCommands(config: PaseoConfigRaw): boolean {
-  const setup = config.worktree?.setup;
-  if (typeof setup === "string") {
-    return setup.trim().length > 0;
-  }
-  if (Array.isArray(setup)) {
-    return setup.some((command) => typeof command === "string" && command.trim().length > 0);
-  }
-  return false;
-}
+import {
+  buildWorktreeSetupCalloutPolicy,
+  selectActiveGitWorkspaceProject,
+  shouldShowWorktreeSetupCallout,
+} from "./worktree-setup-callout-policy";
 
 export function WorktreeSetupCalloutSource() {
   const selection = useActiveWorkspaceSelection();
@@ -58,7 +26,7 @@ export function WorktreeSetupCalloutSource() {
     if (!activeProject) {
       return;
     }
-    router.navigate(buildProjectSettingsRoute(activeProject.projectKey));
+    router.navigate(buildWorktreeSetupCalloutPolicy(activeProject).projectSettingsRoute);
   });
 
   const readQuery = useQuery({
@@ -73,29 +41,31 @@ export function WorktreeSetupCalloutSource() {
     retry: false,
   });
 
-  const shouldShow =
-    activeProject !== null &&
-    readQuery.data?.ok === true &&
-    !hasSetupCommands(readQuery.data.config ?? {});
+  const calloutPolicy = useMemo(
+    () =>
+      activeProject && shouldShowWorktreeSetupCallout(readQuery.data)
+        ? buildWorktreeSetupCalloutPolicy(activeProject)
+        : null,
+    [activeProject, readQuery.data],
+  );
 
   useEffect(() => {
-    if (!shouldShow || !activeProject) {
+    if (!calloutPolicy) {
       return;
     }
 
     return callouts.show({
-      id: `worktree-setup-missing:${activeProject.projectKey}`,
-      dismissalKey: `worktree-setup-missing:${activeProject.projectKey}`,
-      priority: 100,
-      title: "Set up worktree scripts",
-      description:
-        "Add setup commands so new worktrees can install dependencies and prepare themselves automatically.",
+      id: calloutPolicy.id,
+      dismissalKey: calloutPolicy.dismissalKey,
+      priority: calloutPolicy.priority,
+      title: calloutPolicy.title,
+      description: calloutPolicy.description,
       actions: [
-        { label: "Open project settings", onPress: openProjectSettings, variant: "primary" },
+        { label: calloutPolicy.actionLabel, onPress: openProjectSettings, variant: "primary" },
       ],
-      testID: `worktree-setup-callout-${activeProject.projectKey}`,
+      testID: calloutPolicy.testID,
     });
-  }, [activeProject, callouts, openProjectSettings, shouldShow]);
+  }, [calloutPolicy, callouts, openProjectSettings]);
 
   return null;
 }