gistfile1.txt

- Category.all.each do |category|
  %li
    = link_to(category.title, category_path(category))
    - unless category.subcategories.blank?
      %ul
        - category.subcategories.each do |subcat|
          %li
            = link_to(subcat.title, category_subcategory_posts_path(category, subcat))

Since you need to have that <ul> there only when there are subcategories, it's hard to avoid.

One idea I had though… you could unconditionally have the <ul> but style it gone when empty:

ul:empty { display: none }