If you don't know where it is then I suppose you didn't enable it. I don't have that nano but it should be somewhere in the settings/volume limit.
Maybe try to reset the nano (not restore). On other models you hold the menu and center button at the same time for a few seconds to reset. Double check with other headphones and as a last resort try a restore. also check if its under warranty. You might get a replacement. Edit-Just noticed your in Australia, The volume limit may not be there for Australia if you cant find it.