Ideas on what to do with toilet space...and rack.

You can purchase wallboard kits at the big box stores: Lowes & Home Depot, or Ace Hardware to fix your hole in the wall. Nothing to it; very easy, & economical. Then, until you can do something more, just paint over the wallpaper for now. Any old left-over paint would look better, & would do wonders to give a more uncluttered look. Good luck!

Create floating shelves with slats on sides and back of wall to screw boards into - paint or left natural - depending on your preference and use the baskets you are using now to organize. Take rack outside placing plants, décor, signs etc on shelves and S hooks to hang plants and tools off the bottom shelf and sides. Fix that hole and paint!

remove wallpaper and spray paint baskets same color to give unity and visually enlarge the space

white breadboard on the bottom, recycled upper kitchen cabinet above the toilet, painted same color as bottom. Would make the space look larger.

Stripping the wall paper and painting is your option. Since it is such a small space I would go to the garden center, get basket hangers that are flat on top. These are prettier than regular shelving brackets. Then get some 1 x 8 or 1 x 10 from the lumber company have them cut to size and paint or stain them. When you measure, measure the back corners for width and then measure out about 8".

Do this for each shelf. In the world of construction, not everything is square or plumb. Load up with knick knacks and towels. Leave the boxes out.

strip the wall paper. Prep and paint. There used to be a floating shelf system that a bracket would hold a length of board so it "floated" From wall to wall Have the boards go completely across toilet cubby. Roll up towels, stack washcloths. I'm not fond of the fabric cubes for storage. I would use wicker baskets instead or small galvanized metal bins.

I would remove wallpaper and paint a very light color. I would also add some rustic wood floating shelves instead of that current storage rack.

I ended up putting up wire shelving. It was the cheapest option.

Get rid of the rack and the wallpaper and the plunger and the toilet paper holder.

You could do floating shelves since you do have nice corner there and dress them up with baskets