You can see whether they apply what they have read, tegan, e.g. if there is a written instruction which is carried out correctly, I think you can assume the child could read it and, just as implrtantly, understood it. Conversely, if a child does appear to understand a written instruction, not being able to read it may be one of the reasons.
There are other clues as well. With my kids it was just getting on with reading by themselves for the fun of it.
Do teachers know which parents listen to their children reading or are read to/look at books with parents? That must help where they do know. And if they don't know (or fear) that a child doesn't look at books at home, it seems onlt reasonable to give those children more help than others if they are struggling with reading.