The toilet [or latrine] used to be a dirty place. One would see the filth around and it was a smelly place. It was not proper to take the name of Allah and make du`aa’ in such a place. Allah’s name is venerable and it must be respected.
Thus, the rule was that in such place the name of Allah should not be mentioned. Those who keep their toilets dirty and smelly should still abide by this rule.
But most people now keep their toilets very clean. If you keep your bathroom clean, then the rule will be that do not say the name of Allah when you are on the toilet seat. But when you finish from there and use the flush, then the area is for wudu’; and there you can mention any adhkar (mentions of Allah) of wudu that you wish to say.
As for making dhikr in the bathroom when you are making wudu or ghusl (ritual bath), it is permissible if you are sure that the place is pure and there is no impurity in it.
Also, this dhikr is to be confined to the du`aa’s (supplications) of the wudu or ghusl such as saying the Bismallah or seeking Allah’s refuge against Satan; otherwise it’s better not to make dhikr – which is meant to be an act of worship – in the bathroom.
